FAIR Plan strained by Malibu and other wealthy enclaves Play

The California FAIR Plan, the insurer of last resort, is facing financial stress because so many of its policies cover wealthy areas like Malibu.

More than 7 percent of the state insurance plan's potential liability comes from just seven zip codes, including Malibu. One single affluent Lake Tahoe zip code has $9 billion in risk. And about half of those houses are vacation homes or second homes.

UC Berkeley says the FAIR Plan's exposure risk is "disproportionately tied to higher-income, high-asset communities." That's driven up costs for all FAIR policyholders, with premium burdens falling "more heavily on middle-income households" even in moderate-risk areas.

That means they're effectively subsidizing wildfire losses for high-value homes in places like Malibu.