Insurance giant State Farm to stop insuring homes in California, citing catastrophic wildfires
Insurance giant State Farm will stop insuring homes in California, citing catastrophic wildfires and rapidly rising inflation costs that have put policies at premium
- State Farm has announced it will stop selling new homeowners insurance policies in California starting Saturday
- The company, one of California’s largest insurers, said it made the decision because of the frequency of wildfires and high rebuilding costs.
- Existing policyholders will not be affected and the company will still sell auto insurance in the state.
America’s largest home insurance company announced it would no longer insure homes in California, saying the risk of wildfires was too great and the cost of rebuilding too high.
State Farm, the nation’s largest auto and home insurer by premium volume, said existing customers would not be affected.
But from Saturday, no new home insurance policies will be issued. The company will continue to offer auto insurance.
State Farm said it “made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a difficult reinsurance market.”
In its statement, State Farm said it takes “seriously our responsibility to manage risk.”
A firefighter is seen battling the campfire as it rages in Paradise, California in November 2018. State Farm will no longer insure homes in California, due to the risks
The charred remains of Paradise, California, are seen in December 2018, following the devastating camp fire
State Farm is the nation’s largest auto and home insurer by premium volume
The Bloomington, Illinois-based company said it was “necessary to take these steps now to improve the financial strength of the business.”
They added: “We will continue to evaluate our approach based on changing market conditions.”
State Farm’s move follows last year’s decision by American International Group to end insurance policies on thousands of expensive properties. The group informed its wealthy customers in California that their policies would not be renewed.
The notices were part of a plan by AIG to stop selling homeowners insurance policies in California through a unit regulated by the state’s Department of Insurance.
Michael Soller, California’s assistant insurance commissioner, told the Wall Street Journal that the state was working hard to reduce wildfire risk.
He said they were ‘really tackling the root causes of insurance problems, i.e. the risk of wildfires’.
A new report has laid bare the most disaster-prone counties in the US – unmasking communities in California and Florida among the most dangerous
An aerial view of homes destroyed by the campfire in Paradise, California, as seen in February 2019
California homes are also at risk of landslides, as seen on February 28 in Los Angeles County
Flooding is also a high risk: Houses are seen surrounded by floodwaters on January 11 in Planada
Soller said California has created a discount insurance program that takes into consideration consumer investments in wildfire mitigation.
“The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,” Soller said.
The Environmental Protection Agency, in its section on California wildfires, confirms that the situation is getting worse.
“Wildfires, a long-standing and frequent threat to California, are expected to increase in intensity and frequency due to climate change,” they state.
The five largest recorded fires in the state have all occurred since 2018, according to the California Department of Forestry and Fire Protection.