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The state's insurer of last resort is straining under the pressure in its biggest test yet.

Published Jan. 10, 2025 • 6:00am

As gale-force winds picked up this week around his home in Brentwood, the quiet neighborhood in the Westside of Los Angeles, Karl Susman had a bad feeling.

Now, as fires torch swaths of the city’s hillsides, Susman, the owner of an insurance agency, has evacuated to a relative’s house, where he’s been on the phone nonstop with clients steeling themselves to the possibility of untold loss.

“There’s so much that has been burned away … but I’ve been so busy, I don’t think it’s really sunk in yet,” Susman said Thursday of the handful of fires that remained uncontained in the L.A. area.

A full accounting of the damages won’t be clear for months, but the total could top that of the 2017 North Bay firestorm ($9 billion) and the 2018 Camp fire ($12.5 billion insured damages).

“This has at least the potential to be collectively the costliest wildfire disaster in American history,” UCLA climate scientist Daniel Swain said during a YouTube broadcast. “This is going to send the wildfire home insurance crisis in California into the stratosphere, if it weren’t there already.”

Potentially billions of dollars of those liabilities may be held by California’s FAIR Plan, the state’s home insurer of last resort. Every private carrier in the state is required to participate in the nonprofit plan, which was designed as a backup policy in the 1960s, an age of civil unrest and Southern California chaparral brush fires not unlike those burning this week. The FAIR Plan quickly became the only insurance option for homeowners in high-fire-risk areas across the state, and the number of policies remained stable for decades. But after the devastating 2017 and 2018 fire years, insurance companies started curtailing business, citing higher liabilities, and FAIR policy numbers ballooned.

In 2018, the FAIR Plan’s total risk exposure was $50 billion. By 2024, it had exploded to $458 billion. In Pacific Palisades alone, where the largest fire was still burning Friday, the FAIR Plan’s total liability is around $5.9 billion.

And under rules from the California insurance commissioner that were finalized this fall, that pain could be spread across the state in all new ways.

‘Batshit crazy conditions’

Last year, the tony beachside Pacific Palisades neighborhood became one of the places hit hardest by State Farm’s decision not to renew 72,000 home insurance policies across the state. The community experienced a nonrenewal rate of nearly 70%.

“This is exactly the situation that carriers have been afraid of,” Susman said. “The new climate environment we’re in nowadays means these types of batshit crazy conditions.”

In many ways, the situation of Pacific Palisades mirrors the challenges of California’s insurance market in miniature, as homeowners flocked to the FAIR Plan, leaving it covering a high-risk population in an era of unprecedented climate catastrophe.

FAIR Plan growth is accelerating as private carriers have pulled back, according to the program’s latest data, with year-over-year policy coverage expansion topping 61% statewide. The number of FAIR Plan policyholders in Pacific Palisades increased by 85% over the same period.

Many of the ZIP Codes with the steepest upticks in FAIR Plan policy value over the last year are in San Francisco and the inner East Bay, in places not deemed at high risk of wildfire.

In San Francisco, the Twin Peaks area saw a 1,217% increase in residential policy coverage, and Portola saw a 674% jump. In the East Bay, the Bay Farm area of Alameda saw a 1,327% bump, and the east side of San Leandro was up 1,772%.

Berkeley tops the list of Northern California’s greatest municipal exposures under the FAIR Plan, with $5.5 billion in total liabilities. The East Bay hills enclave of Orinda saw the state’s largest number of nonrenewals from State Farm in 2024. There, FAIR liabilities stand at $4.2 billion.

At a March Assembly hearing in Sacramento, FAIR Plan President Victoria Roach painted the picture of a system on the brink — one catastrophic event away from insolvency.

Roach told the San Francisco Chronicle last year that the plan had about $385 million on hand to pay for wildfire damage to its policyholders. The plan also has funds available by bond and reinsurance that can backstop its financial position. But that may not be enough.

“As those numbers climb, our financial stability comes more into question,” Roach said of the FAIR Plan’s risk exposure.

‘Better anticipate future losses’

This fall, California Insurance Commissioner Ricardo Lara paved the way for a new kind of FAIR bailout.

Insurance carriers have long clamored for updates to regulations they claim artificially depress their rates and make it unprofitable to operate in California.

They got their wish in the form of the Sustainable Insurance Strategy, which was meant to get carriers writing new business in the state, particularly in fire-prone areas.

One new rule allows private insurers to cover the cost of large FAIR Plan losses by adding temporary supplemental fees to all their customers’ policies — up to half for liabilities under $1 billion, or the full amount above $1 billion. Of the 33 other states with a version of the FAIR Plan, only Florida and Louisiana allow insurance companies a similar worst-case bailout paid for directly by policyholders, with regulator approval.

That could mean a few hundred dollars levied on every premium bill, depending on the size of the gap.

“Given the degree of destruction we’re currently seeing, that’s very possible,” said Joel Laucher, a consumer advocate with the nonprofit United Policyholders.

Laucher, who worked for more than three decades as a regulator in the California Department of Insurance, cautioned that payouts from the current Southern California fires will likely take many months or even years to fully materialize.

The hope is that the FAIR Plan will be able to strengthen its financial position over that time, but only if no other catastrophic fire hits the state.

“Insurance coverage used to be a known thing you put in your budget,” Laucher said. “Now it’s become one major expense where you have no certainty of what it might be.”

The reinsurance that private carriers and the FAIR Plan rely on to offset their liabilities is in its annual renewal cycle.

“Those people are looking at this situation and saying, this is supposed to happen one in 100 years, not three times in 10,”said Michael Wara, director of the climate and energy policy program at Stanford’s Woods Institute and a consultant on wildfire and insurance policy.

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If primary insurers can’t get reinsurance, they would have to keep more cash on hand to pay out potential claims — and could raise premiums accordingly. “We’re already in a situation where a lot of people are struggling to afford their homeowners insurance. But if things got 100% or 200% worse, then we’re in a different world,” Wara said.

Reinsurers would need “a clear signal that California takes this problem seriously,” he said, in order to head off another five years of escalating insurance crisis. “I think we are going to need confidence-raising measures taken to stabilize the situation.”

‘A big question mark’

The two other key provisions of Lara’s new rules allow carriers to use forward-looking wildfire catastrophe models to set rates, and give them the ability to pass the cost of reinsurance to policyholders.

Insurance companies are in the business of pricing and transferring risk, not reducing it, but the new rules do require the FAIR Plan to offer a discount to homeowners who reduce their risk with efforts such as installing heat-resistant glass and ember protection for eaves. New catastrophe models will also take landscape mitigation work into account when scoring risk and making underwriting decisions.

But as for whether insurers will begin to write scores of new policies now that they are able to charge higher premiums, “that’s a big question mark,” said Dave Jones, Lara’s predecessor at the California Department of Insurance and the current director of UC Berkeley’s Climate Risk Initiative.

“This kind of event is why they sought the changes. They got the changes. They’re going to be filing for substantial rate increases, and they’re probably going to get them,” he said.

He expects the FAIR Plan policy load to continue to grow, along with the population for whom a FAIR Plan policy simply becomes too expensive to afford.

He would like to see government-funded insurance premium subsidies to help the less affluent afford homeownership.

Regardless, the system won’t capsize tomorrow, he said, even if the L.A. fires do add up to become the country’s most expensive disaster ever.

But he is pessimistic about the long term, as global temperatures continue to rise.

“Things may get better in the short and mid term because of these regulatory changes, but in the long run, we’re not going to ‘rate increase’ our way out of the climate crisis,” said Jones. “Insurance is the canary in the coal mine when it comes to climate change. And the canary is almost dead.”

Susie Cagle can be reached at [email protected]Kevin Truong can be reached at [email protected]

While Friday morning's 3.7 earthquake and its aftershocks near the San Andreas Fault may have been small, a USGS scientist says it is a reminder to stay prepared.

SAN FRANCISCO (KGO) -- A 3.7 preliminary magnitude earthquake struck off the coast of San Francisco Friday morning, according to the U.S. Geological Survey.

The USGS says it was about three miles from the San Francisco Zoo near the San Andreas Fault and the depth of the quake was five miles.

There were no immediate reports of damage or injuries, according to the San Francisco Fire Department.

The quake was mainly felt in San Francisco and on the Peninsula, but the USGS says it was felt as far north as Marin County and as far south as San Jose.

A first aftershock came in at 2.5 magnitude at 9:39 a.m. and a second 3.0 magnitude aftershock hit at 10:48 a.m. Both are in the same location as the original quake.

Just before sunrise Friday morning, Max Gardiner was in the process of getting up to start his day when he noticed some unexpected shaking.

"I was just puttering around and making coffee and I noticed like the things in the kitchen started shaking, like the glasses in the cabinets so I kind of froze," Gardiner said.

Robin Darrah, an overnight guard at the San Francisco Zoo, explains what he felt.

"I felt a little wobbliness in my legs for a moment like I was getting really tired and for a second there, it was like wow the grave shift really got to me tonight you know?" Darrah said. "And then I heard one of my gates make a little rattle sound, I was like ok so I go to look at it and right when I turn the corner, I hear a call on the radio saying, hey did you feel the earthquake?"

VIDEO: What to pack in your earthquake emergency kit

For this earthquake, no one got an early warning on the MyShake app.

"This is lower than a magnitude four earthquake and that is the main reason why no one received a shake alert powered on their phones, because it was too small," Robert de Groot, a USGS scientist said.

Groot explains earthquakes of these size happen more often than we think. California has around 50 a day.

Still, they want to use this a reminder to stay prepared.

Prepare NorCal: Disaster Preparedness Resources

"Basically we tell people probably not something bigger from this particular event but still be ready for earthquakes that can happen in other places," he said.

Because of the small size, no tsunami alert was triggered like San Francisco experienced in December.

The USGS also wants to remind people if they feel an earthquake again, to drop, cover and hold on.

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SAN FRANCISCO--(BUSINESS WIRE)--University of California, San Francisco (UCSF) Department of Radiology & Biomedical Imaging and GE HealthCare today announced the launch of a Care Innovation Hub, a joint research collaboration that aims to address meaningful clinical challenges in three key areas: accessibility to advanced medical imaging, non-invasive diagnosis and management of neurological and neurodegenerative disease, and precision oncology. The Care Innovation Hub leverages the strengths of academia and industry to create, evaluate and translate novel technology into a clinical setting with the goals of advancing diagnosis and treatment of disease, improving hospital operations and driving more equitable access to care.

The Care Innovation Hub builds on a decades-long history between UCSF and GE HealthCare, bringing research focus areas under one framework. It integrates the research and clinical expertise of UCSF in critical care areas such as brain health, neurodegenerative disease and oncology, with GE HealthCare’s deep knowledge in research and product development.

“Our collaboration with GE HealthCare brings a practical focus on addressing well-defined clinical objectives,” said Sharmila Majumdar, PhD, Research Vice Chair in the UCSF Department of Radiology & Biomedical Imaging. “Together, we’re accelerating innovation in ways that will improve access to care and outcomes across healthcare settings.”

The Care Innovation Hub centers on three focus areas designed to address impactful clinical goals and answer critical questions in the field of medical imaging and treatment:

“We’re honored to collaborate with UCSF on this important work, which has the potential to significantly improve patient outcomes and address life-threatening diseases like Alzheimer’s disease and prostate cancer worldwide,” said Erin Angel, PhD, GE HealthCare Global Vice President, Research and Scientific Affairs. “By combining our strengths, we’re taking steps toward solutions that meet real clinical needs. Together, we’re building something we hope will make a meaningful difference for patients and the future of healthcare.”

Building an imaging service line of the future

UCSF and GE HealthCare aim to dramatically improve medical imaging services by developing more automated imaging methods, such as patient-specific magnetic resonance imaging (MRI) techniques that could adapt to patient needs in real time. This aims to increase efficiency and accessibility to create more consistent, high quality, and personalized care. Projects within this focus area concentrate on advancing quantitative imaging for cardiac and musculoskeletal disease and developing methods to enable high-quality remote scanning.

This focus area aims to answer the question: Can we build a fully automated imaging service line that delivers exceptional care, minimizes inefficiencies and adapts to patients in real time?

Advancing solutions for brain health and neurodegenerative disease

UCSF and GE HealthCare aim to expand understanding of brain functions using advanced imaging. The team aims to explore the links between white matter injury, vascular disease, and Alzheimer’s disease, and identify ways to predict treatment efficacy for brain health interventions.

This focus area aims to answer the question: Can we leverage advanced imaging to evaluate aging and biomarkers to better understand neurodegenerative disease, including Alzheimer’s disease?

Driving Accessible Precision Oncology

UCSF and GE HealthCare hope to develop quantitative imaging methods to monitor patient response to radiopharmaceutical therapies (RPTs) and create protocols to expand access to these emerging treatments. The team aims to standardize processes for new approaches, such as visualization of alpha-emitting radiopharmaceuticals. Through this work, the team aims to establish quantitative methods to assess how a patient is responding to treatment, and build, evaluate, and translate novel diagnostic innovations to patient care.

This focus area aims to answer the question: Can we create new methods to assess how a patient is responding to RPT and expand access to theranostics to clinicians and patients in their own communities?

The collaboration research activities will take place at University of California, San Francisco facilities in the San Francisco Bay Area, California.

About University of California San Francisco Department of Radiology & Biomedical Imaging

The University of California, San Francisco is the leading university exclusively focused on health. Through advanced biomedical research, graduate-level education in the life sciences and health professions, and excellence in care delivery, UCSF spearheads revolutions in health worldwide.

The Department of Radiology and Biomedical Imaging at the University of California, San Francisco, is a leading health sciences center focused on serving patients, conducting research, and training the next generation of radiologists. We are proud to have some of the foremost names in diagnostic, therapeutic, and interventional radiology developing promising new approaches to identify and treat disease.

Visit our main and department websites for more information: https://www.ucsf.edu/ and https://radiology.ucsf.edu/research.

About GE HealthCare Technologies Inc.

GE HealthCare is a leading global medical technology, pharmaceutical diagnostics, and digital solutions innovator, dedicated to providing integrated solutions, services, and data analytics to make hospitals more efficient, clinicians more effective, therapies more precise, and patients healthier and happier. Serving patients and providers for more than 125 years, GE HealthCare is advancing personalized, connected, and compassionate care, while simplifying the patient’s journey across the care pathway. Together our Imaging, Advanced Visualization Solutions, Patient Care Solutions, and Pharmaceutical Diagnostics businesses help improve patient care from diagnosis, to therapy, to monitoring. We are a $19.6 billion business with approximately 51,000 colleagues working to create a world where healthcare has no limits.

Follow us on LinkedIn, X, Facebook, Instagram, and Insights for the latest news, or visit our website https://www.gehealthcare.com for more information.

Contacts

UCSF Media Contact: Robin Marks, Senior Public Information Representative (415) 502-6397 [email protected]

GE HealthCare Media Contact: Sara Pottle M +1 626 390 7620 [email protected]

Happy Friday, San Francisco! Below are some of our favorite things to do in the San Francisco Bay Area this weekend. We gather SF weekend plans weekly, so you’ll always have something to do on Friday, Saturday, and Sunday. If you’re looking for seasonal inspiration, check out our winter bucket lists and our guide of [trackLink link_url="https://secretsanfrancisco.com/things-to-do-in-january/"]events this January.

1. Check out this beautiful lighted art festival

The annual Napa Lighted Art parade is back for another year of beautiful displays right in Downtown Napa. The festival includes over a dozen large-scale light installations throughout the town, and visitors can take a self-guided walking tour of the town to see the art. The festival lasts several weeks and opens this weekend, on January 18.

2. Watch a show at SF Sketchfest

SF Sketchfest returns this week, on January 16, and features major headliners such as Kathryn Hahn and Bill Murray. The festival includes sketch comedy, standup, talks, and more until February 2nd. Tickets go fast, so we recommend checking out the schedule now for shows in venues across the city.

3. Take a walking tour of Fort Mason

Fort Mason is a historic site with an interesting past. SF City Guides frequently host walking tours of the site. The tours are approximately an hour, and you can sign up online for a Saturday afternoon slot.

4. Shop a vintage show at the Ferry Building

The ferry building regularly hosts local farmer’s markets, but this weekend, you can check out a wonderful vintage show. The Pickwick Vintage Show includes over 70 exhibitors from across California selling clothes, accessories, jewelry, and more. You can find the market at the Ferry Building on Sunday from 10 am to 4 pm.

5. Relax at this new SF spa

If you’re still tired after New Year’s Eve (we’ve all been there), we recommend checking out this new spa in San Francisco, complete with cold plunges and a massive sauna. Alchemy Springs offers yoga classes, memberships, or passes for their social spa.

6. Explore an amazing museum exhibition

San Francisco is lucky to be home to so many excellent museums, including the de Young, SFMOMA, Asian Art Museum, MoAD, and more. There are plenty of fantastic exhibitions to see right now, many of which are temporary. We highly recommend checking out the exhibits happening right now, and many will end in January, so now’s the perfect time.

7. Indulge in fresh Dungeness crab

It’s finally Dungeness crab season here in SF, which means we can have delicious crab fresh from the boats at Fisherman’s Wharf. Many restaurants will also include the local specialty in their menu if you prefer to dine out instead of cooking one yourself.

8. Take an unforgettable winter day trip to one of these nearby destinations

Here in San Francisco, we’re well-located to enjoy some spectacular day trips around the Bay Area. Read our list for over 30 destinations, from Carmel to Muir Woods. Whether you want to explore local history or enjoy the great outdoors, there’s something for everyone at any time of year.

9. Take a spin on the ice at Union Square

The beloved Union Square Ice Rink is officially open for skating. The ice rink opens every holiday season right in Downtown SF and is open to skaters through January 20th, 2025. You can reserve your tickets for the ice rink online now.

10. Book a table at one of SF’s best restaurants

We’re lucky to have many amazing restaurants in SF, and the weekend is the perfect time to try one. From award-winning pizza places to fine dining, there’s something for everyone. Check out our full list, suggested by locals, for the perfect dinner plans this weekend.

See also: Free things to do in the Bay Area that aren’t hiking

Beauty retail giant Sephora has closed yet another store in San Francisco, nearly a year after pulling out of the beleaguered San Francisco Centre mall downtown.

On Wednesday afternoon, the letters on the Sephora Studio’s sign in Laurel Heights appeared to have been removed from the facade of the building. The space was vacant, leaving just its trademark black-and-white striped awning behind. A poster in the window revealed the shuttered store was available for lease through Mission District-based real estate company UrbanGroup.

Louis Cornejo, president and broker of UrbanGroup, confirmed with SFGATE in an email that the 2,600-square-foot space at 3407 California St. has been on the market for “a couple of weeks” and “demand has been very steady.” Though data from the city shows Sephora had been operating from that address since 1999, the company swapped it out with the Sephora Studio concept amid a significant expansion in 2019 as it tested similar retail prototypes at non-mall locations across the country. These focused on smaller footprints and more tech-savvy bells and whistles, introducing same-day pickup options and the ability to virtually try on makeup looks.

The first Sephora Studio debuted in 2018 at a 2,000-square-foot store in Boston, but by 2020, the company decided not to move forward with the concept due to limits it posed on its product offerings, instead opting for larger stores with the same customized services.

“I believe the Studio concept had 5 throughout the US,” Cornejo told SFGATE in an email. “Laurel Village was the most successful and last to close after their test.”

A spokesperson for Sephora did not respond to SFGATE’s requests for comment regarding the reason for the closure.

The store is sandwiched between a Super Duper burger joint and an Element 7 dispensary inside the bustling Laurel Village shopping center with a Peet’s Coffee, Bryan’s Grocery, Wells Fargo bank, Proposition Chicken, Chico’s clothing store, Ace Hardware and Books Inc.

Cornejo called Laurel Heights “one of the most in demand neighborhoods in SF,” adding that the “location is probably one of the best in SF, these buildings were designed for retail and include parking in back which is very rare in SF.” The space is leasing out for $28,600 a month.

The closure leaves four Sephora stores in San Francisco: Powell Street, in Embarcadero Center, on Union Street and in Stonestown Galleria.

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