California Insurance Commissioner Ricardo Lara said Wednesday the state’s Fair Access to Insurance Requirements Plan has agreed to increase its commercial property coverage limits to $20 million per location for businesses unable to find coverage in the traditional market.

But the Washington-based American Property Casualty Insurance Association said the move will likely worsen market conditions.

Under the agreement, the FAIR plan’s combined coverage limits under its division I commercial property program will increase to $20 million per location, from its existing limit of $8.4 million.

The FAIR plan’s division II business owners program will also increase limits to $20 million per location, from $7.2 million, the California Department of Insurance said in a statement.

The revised coverage limits could take effect in the fourth quarter, subject to filing and regulatory approval.

Businesses operating in the state welcomed the move. Many have been calling for greater coverage options as recent wildfire losses have led admitted insurers to increase rates, reduce capacity or withdraw from the California property market.

The increased limits offer “a much-needed reprieve” for California summer camps, Mike Stillson, chair of the California Collaboration for Youth, said in the statement.

“In recent years, challenges to camps have been exacerbated by increasing costs for insurance coverage,” Mr. Stillson said.

In a statement Thursday, the American Property Casualty Insurance Association said the agreement was a “necessary short-term solution.”

Forcing more coverage into the FAIR plan “will likely make conditions worse for consumers and the admitted market, as assessments to cover FAIR Plan losses will be the likely result,” Mark Sektnan, APCIA vice president for state government relations, said in the statement.

Each California insurer is required to participate in FAIR plan losses in direct proportion to its market shares.

“Admitted insurers are already struggling with inadequate rates to cover the increased risks caused by climate change and the growing number of communities in wildfire-prone areas of the state. Adding more liabilities onto the admitted market will disincentivize insurers from committing more capital where it is needed in these high-risk areas,” Mr. Sektnan said.