State Farm stops new home insurance sales in California as wildfire
risks grow
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[May 31, 2023]
By Noor Zainab Hussain
(Reuters) - State Farm said it would stop selling new insurance policies
to homeowners in California, exacerbating troubles for thousands in the
wildfire-prone state, who are already feeling the heat with coverage
getting costlier or harder to come by.
State Farm General Insurance Company - State Farm's provider of
homeowners insurance in California - said on Friday that it made this
decision due to "historic increases in construction costs outpacing
inflation, rapidly growing catastrophe exposure, and a challenging
reinsurance market."
The insurer said it was necessary to take these actions now to improve
the company's financial strength.
Homeowners who have lost their home cover can purchase a policy from the
California FAIR Plan, a high-risk, privately run insurance pool
established under California state law.
Global insurers are facing a challenging 2023 as reinsurers hike rates
on key business lines by as much as 200% from Jan. 1. The reinsurers
blame sharp losses from the war in Ukraine and from natural catastrophes
such as Hurricane Ian in Florida.
Additionally, climate change has added to problems. Global insured
losses from catastrophes were anticipated to reach at least $15 billion
in the first quarter alone, insurance broker Aon Plc said in a report.
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State Farm said it would stop accepting new applications in the state
effective May 27, adding that the decision will not impact personal auto
insurance.
California's first major blaze of the 2023 season, measuring 100 acres
or more, occurred in late April, which signalled the potential for
extreme wildfire activity this summer and fall.
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![](../images/053123PIX/news_i7.jpg)
Residents watch part of the Sheep Fire
wildfire burn through a forest on a hillside near their homes in
Wrightwood, California, U.S. June 11, 2022. REUTERS/Kyle Grillot/File
Photo
![](http://archives.lincolndailynews.com/2023/May/31/images/ads/current/graue_lda_WHITETRUCKpreowned_052223.jpg)
Experts have warned that bountiful rainfall during the winter
prompted heavy growth of grass and scrub that will dry out by
summer, leaving a larger, thicker fuel bed for wildfires.
State Farm's move does not bode well for homeowners in the state.
The company is the biggest provider of homeowners' insurance in
California, as measured in 2022 direct premiums written, according
to data on the Insurance Information Institute's website.
Among those pulling back from home insurance in California in recent
years are some household names such as Liberty Mutual, Reuters
reported.
Liberty Mutual did not immediately respond to a request for comment.
In California, nonrenewals of homeowners' insurance policies
initiated by insurers in 2021 rose nearly 30% to 241,662 from a year
earlier, data from the state's Department of Insurance showed.
FAIR Plan policies made up about 3% of the overall residential
insurance policies in California as at the end of 2021, the data
showed.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Megan
Davies and Matthew Lewis)
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