Financial Assurances and Insurance for Redevelopment (FAIR)

SB 468 (Chapter 549, Statutes of 2001) established the second part of the California Financial Assurance and Insurance for Redevelopment Program (FAIR Program). The objective of the FAIR Program is to lower the transaction costs of “environmental insurance” with Cal/EPA providing a package of pre-negotiated and standardized policies to stimulate the cleanup and redevelopment of brownfields and other environmentally impaired properties throughout the state. Through a competitive bidding process, the Secretary of Cal/EPA will select the insurance company or companies (depending upon whether the request for proposal specifies one or more than one company), which will provide the insurance products for a three-year period.

The FAIR Program has two key components:

A prenegotiated package of discounted environmental insurance products, including

• Pollution Legal Liability Insurance to address unforeseen conditions and third party liability for property damage and personal injury;
• Cost Overrun Insurance to cover costs of cleanups that are over and above cleanup cost estimates; and
• Secured Creditor Insurance to cover loan default or foreclosure that occurs due to pollution conditions.

Subsidies to be used to offset the costs of premiums and deductibles.

To the extent that funds are available, FAIR is designed to provide subsidies to persons conducting response actions at eligible properties who purchase the pre-negotiated environmental insurance products:

• Up to 50% of the cost of environmental insurance policy premiums;
• Up to 80% of the self-insured retention amount of the cost overrun insurance policies (essentially, the policy’s “deductible,” or the amount that the person is obligated to pay before the insurance policy pays), up to a maximum of $500,000.

See the FAIR Fact Sheet (Adobe Acrobat, 20 KB) for additional information.

Selection of Insurance Carrier

Cal/EPA has retained the services of MGP Environmental Partners to assist in the process of selecting insurance carriers for the FAIR Program. Cal/EPA has conducted workshops (Adobe Acrobat, 202 KB) to develop a request for proposal to which interested, qualifying insurance companies are to respond. On August 12, 2002, Cal/EPA and MGP Environmental Partners formally noticed the Request for Qualifications and Proposal (RFQP), entitled the "California FAIR Brownfields Insurance RFQP (#I-20008) (Adobe Acrobat, 773 KB). On June 9, 2003, Cal/EPA provisionally selected AIG Environmental, a division of the American International Specialty Lines Insurance Company, to be the insurance carrier for the FAIR Program.

Negotiation of Program Details with Selected Insurer

AIG Environmental's writing of insurance policies under the FAIR Program is contingent upon Cal/EPA and AIG agreeing on a variety of elements, including FAIR Program policy terms and conditions, product pricing, and program administration. Cal/EPA is currently negotiating with AIG Environmental on these program details.

FAIR Implementation Milestones

Schedule of Upcoming Activities