California FAIR Plan Association.

Calderon and Alvarez anchor Assembly Bill 226 with a financing framework that would authorize the California FAIR Plan Association to access bonds and credit facilities through the California Infrastructure and Economic Development Bank to fund claims and bolster liquidity for its claims-paying capacity, treating the Fair Plan as a participating party and designating its claim-cost financing and liquidity enhancements as a project eligible for bond financing, with immediate effect as an urgency statute.

Under the proposed framework, the California Infrastructure and Economic Development Bank could issue taxable or tax-exempt bonds to finance all or part of the California FAIR Plan Association’s costs of claims or to increase liquidity and claims-paying capacity, and could lend bond proceeds to the association or refund prior financing. The financing would be secured by a continuous statutory lien on the association’s collateral, including premiums, revenues, receivables, and assessments, with the lien effective from the first issuance or first line-of-credit delivery. The bank would not govern matters regulated by the Insurance Commissioner, though it could enforce related obligations of the association, and bonds issued under this framework would not constitute state debts.

The bill adds new definitions to formalize the arrangement, including recognizing the California FAIR Plan Association as a participating party and defining project terms to encompass financing those claim-cost and liquidity enhancements within approved limits. A companion provision in the Insurance Code would authorize the association, with prior approval from the Insurance Commissioner, to pursue bond issuance, loans, and lines of credit with the Bank, secure those obligations with collateral, and enter into related agreements, while establishing repayment terms that, once approved, could not be altered without further commission oversight. It also contemplates member assessments to ensure timely debt service if other sources prove insufficient, and it clarifies that, during the period a bond or line of credit remains outstanding, certain Insurance Code provisions would not apply to the association.

The proposal situates the financing within a broader regulatory and fiscal context that preserves Insurance Commissioner oversight over the plan of operation while enabling a bank-financed liquidity mechanism for the Fair Plan. It anticipates a potential appropriation flow to the Bank Fund if revenues accrue, and it requires a two-thirds vote plus an appropriation and fiscal committee review to advance, reflecting the bill’s urgency-driven timeline. In broader terms, the authors argue the availability crisis in basic property insurance—exacerbated by wildfire risk and the growth of the Fair Plan—necessitates immediate access to diversified financial tools to support timely claims payments and catastrophe readiness, subject to the safeguards and approvals outlined above.