New state-run FAIR Plan will address homeowner and commercial insurance availability, not affordability.
Kelly Campbell poses for a portrait at her office in Broomfield, Colorado, on Tuesday, Nov. 19, 2024. Campbell is the first executive director of the Colorado FAIR Plan, a new insurance platform established by the state legislature to serve as a last resort for property insurance in Colorado. A new insurance company is forming in Colorado, but it won’t be advertised on television by Patrick Mahomes, an emu or a guy named Mayhem.
CoreLogic, a company that produces a wildfire risk assessment for every state, estimated in August that 321,294 homes in Colorado valued at $141 billion were at risk of being destroyed in a wildfire, ranking the state second in the nation when it comes to the value of property in danger.. A report earlier this year by Roof Gnome found 20 of Colorado’s 64 counties were on a list of areas in the United States most vulnerable to hail.
The FAIR Plan will be designed to address property owners’ ability to find an insurance policy. But it will not help with the dual problem of theIf the FAIR Plan’s board has its way, few of the policies actually will be sold. Money to fund the insurance program is raised through an assessment charged to insurance carriers licensed to do business in Colorado. The first assessment raised $5 million to pay salaries for Campbell and other future employees and to hire actuaries to help figure out the math that will set rates to make sure there is enough money to pay claims should a disaster happen.
A person who owns a more expensive home can buy the FAIR Plan policy, but would need to also purchase a surplus or wrap-around policy to cover the rest, which would mean holding multiple policies on one property. The theory is that commercial insurance companies will be more willing to take on risk when they know they’re not on the hook for the total cost of replacement.
The FAIR policies will not cover water damage, theft, liability or law and local ordinance changes that require building upgrades that were not previously part of the building, Campbell said. Buying insurance already can be complicated and the FAIR Plan will open a whole new market for patchwork plans for homeowners and commercial building owners to figure out, she said.
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