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Fire Insurance Exchange Update

Woodland Hills, May 1, 2015

Dear Fellow Fire Insurance Exchange Member:

Fire Insurance Exchange is one of the insurers comprising Farmers Insurance Group. Fire Insurance Exchange along with Farmers Insurance Exchange and Truck Insurance Exchange, and their subsidiaries and affiliates, provide automobile, homeowners, personal umbrella and business owners insurance.


  • Recent Developments

    Eastern Expansion: As part of a broader eastern expansion initiative, Farmers began providing insurance to Connecticut consumers in 2015. Connecticut became the 35th state in which Farmers provides insurance through its exclusive agent distribution system and the sixth eastern expansion state.

    Smart tips and discounts: Customers can now access unique tips and savings on Farmers Inner Circle, a consumer web portal, on The Inner Circle contains four categories: Auto Smarts, Home Tool Kit, Life Preparedness and Exclusive Farmers Perks. Perks include value added programs like the Farmers Car Shopping Service and pet insurance discounts.


  • Community Involvement

    At Farmers, we have a long history of community involvement. Working in conjunction with the St. Bernard Project (SBP), Farmers began assisting the communities of Joplin, Missouri and Sea Bright, New Jersey return home after severe catastrophes.  In 2014, Farmers has provided more than 530 employee and agent volunteers, who have completed more than 18,000 volunteer hours to help rebuild 53 homes.

    Under our new Thank America's Teacher program, Farmers will give away more than $1 million to teachers in 2015. The Farmers Insurance Open is another example of how Farmers gives back to the community. Working with The Century Club of San Diego and the PGA Tour. Farmers has given back nearly $30 million dollars to local charities.

  • Privileged to Serve

    For more than eight decades, Farmers Insurance Group has provided its customers with coverage options to help them manage risk and meet their insurance needs. We strive to deliver the best value and experience to every customer we're privileged to serve.   Farmers appreciates your business and looks forward to continuing to earn your confidence for many years to come.

Alan R. Gildemeister
Chair of the Board of Governors for Fire Insurance Exchange


Information About the Exchange

As a member of Fire Insurance Exchange, we want you to understand the basics of the operation of an Exchange because, as you will see below, you are an owner of the Exchange.

What is an Exchange?

An Exchange is an insurance organization, which operates in most ways like any other insurance company, but with a few key differences.  Fire Insurance Exchange was organized under a provision in the California Insurance Code, which allows insureds to "exchange" policies with other insureds. Because the insureds cannot practically be involved in actually issuing policies, collecting premium, paying commissions to agents, etc., they appoint a third party - called an "attorney-in-fact" (AIF) - to perform those duties on their behalf for a fee. That appointment is made through a document called a "Subscription Agreement." You were asked to sign a Subscription Agreement at the time you applied for insurance with Fire Insurance Exchange and that is how you became a member (aka subscriber).

Who owns the Exchange?

You do. Subscribers of the Exchange are owners until such time as they no longer have insurance from the Exchange. Subscribers elect a Board of Governors which supervises the financial affairs of the Exchange and the performance of the AIF in conformity with the Subscription Agreement terms.

Why is an AIF fee paid to Fire Underwriters Association (FUA)?

Under the Subscription Agreement mentioned above, members appoint FUA to perform certain of the tasks, such as policy issuance and collection of premium, which are involved in running an insurance operation. The Subscription Agreement specifies an AIF fee of 20 percent of premium although FUA has taken less than that amount.

What is FUA?

FUA is a business name utilized by Farmers Group Inc. (FGI) to describe its functions as the AIF for Fire Insurance Exchange. FGI is a wholly owned subsidiary of Zurich Insurance Group Ltd (ZIG), a Swiss company. FGI and ZIG have no ownership interest in Fire Insurance Exchange, which is owned by its subscribers (insureds).

How was your premium dollar spent by Fire Insurance Exchange in 2014?

Your premium dollar covers Exchange costs including losses incurred, acquisition costs, taxes, license fees, the AIF fee, and any contributions to surplus. For 2014, the AIF fee was 13.4 percent of the premium dollar, which included the AIF profit of 7.24 percent of the premium dollar for that year. The results of the Fire Insurance Exchange were impacted by the large number of catastrophe losses but the company still maintained a strong capital base with surplus of $771 million.

Can the Exchange lose money?

If premiums collected exceed claims payments and other expenses (including the fee for the AIF), then the Exchange retains those net premium earnings (as contributions to surplus). If premiums are not sufficient to cover claims and expenses, the Exchange will lose money. That's one reason it is important to build a cushion against possible future losses. The AIF does not participate in claims losses and does not enjoy any net premium earnings. Importantly, subscribers are not responsible for any losses the Exchange might suffer.

Where can I get more information about the Exchange?

For more information, visit About Us.  

If you have additional questions, please contact:

Subscribers Relations Office
Fire Insurance Exchange
Attn: Corporate Secretary
P.O. Box 4461
Woodland Hills, CA 91365