Californian insurers have been asked to provide an additional $US1 billion ($1.6 billion) to the state FAIR Plan to ensure it can continue paying claims from the Los Angeles wildfires. 

Every property insurer licensed in California becomes a FAIR Plan member as a condition of doing business and may be called on to help fund its continued operation in response to extreme catastrophes.

Insurance commissioner Ricardo Lara says the plan faces a “substantial threat of insolvency due to unprecedented losses” from the fires and the extra funding, known as an assessment, is needed to allow claims payment without interruption. Extra funds were last required in the 1990s. 

“I took this necessary consumer protection action with one goal in mind: the FAIR Plan must pay claims just like any other insurance company,” he said.

Mr Lara is pursuing reforms to help reduce reliance on the FAIR Plan – which has seen policy numbers surge as private insurers exited the market – and to improve and strengthen its operations. 

“We must take action to improve the financial standing of the FAIR Plan and prevent this situation from recurring,” he said.

“I strongly support legislation ... that would allow the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios.”

The plan’s insurer members can apply to collect a portion of the additional assessment through a temporary supplementary fee on their policyholders. 

As of February 9, the FAIR Plan had received 3469 claims from the Palisades fire and 1325 claims from the Eaton fire, plus more than 500 claims related to other wildfires, wind and non-catastrophe events that fall outside its reinsurance cover. It is receiving new claims daily.

It says it has paid $US914 million ($1.5 billion) in claims and has reserved a further $US3.125 billion ($5.17 billion) for the Palisades and Eaton fires.

About 45% of the claims are reported as total losses and 45% partial, including smoke; 10% are reported as fair rental value only.

The plan expects to receive a net total of $US1.45 billion ($2.3 billion) in reinsurance for claims that become due and payable through April.

The American Property Casualty Insurance Association says that as of February 5, insurers have paid more than $US6.9 billion ($11 billion) across 33,000 claims filed for the Eaton and Palisades fires. 

“This is just a start. We understand the road to recovery will be long and insurers are committed to working alongside residents and businesses every step of the way to help southern Californians rebuild,” VP for state government relations Denni Ritter said.