State Farm, California’s largest insurer, announced it will discontinue coverage for 72,000 homes and apartments starting this summer, a move likely to sharply inflate housing costs for affected residents in a state that’s reeling from a series of destructive recent wildfires.
The Illinois-based insurance giant, which accounts for a fifth of the California home insurance market and is the largest property and auto insurer in the U.S., cited rising costs, increasing catastrophe risk, and outdated regulations as reasons it won’t renew California policies for 30,000 homes and 42,000 apartments.
“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” State Farm said in a March 20 statement. “State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now.”
The announcement comes less than a year after State Farm announced it would not issue new policies in California citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market” that helps insurers absorb losses.
And it comes as the state’s elected insurance commissioner embarks on a yearlong overhaul of home insurance regulations aimed at calming California’s imploding market by giving insurers more latitude to raise premiums while extracting commitments from them to extend coverage in fire-risk areas.
The California Department of Insurance said the move raises questions about State Farm’s financial health.
“One of our roles as the insurance regulator is to hold insurance companies accountable for their words and deeds,” said Deputy Insurance…
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