With Southern California's wildfires contained, scrutiny of the state's fire insurance system, particularly the FAIR Plan, has intensified. Created to tackle racial discrimination, the FAIR Plan now serves as a controversial safety net as private insurers withdraw from high-risk wildfire zones. It possesses only $377 million in reserves, raising fears of potential bailouts for catastrophic losses. History shows a shift from providing equitable insurance access to incentivizing risky developments in fire-prone areas, highlighting a critical failure in addressing wildfire risk amidst changing insurance market dynamics.
FAIR Plan was created to combat discrimination but has inadvertently incentivized building in fire-prone areas, leading to increased risks of catastrophic losses.
The underlying issue is that with growing fears of needing a bailout, many private insurers refuse to cover homes in wildfire-susceptible zones.
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