California insurance market rattled by withdrawal of major companies - Associated Press

Two insurance industry giants have pulled back from California’s home insurance marketplace, saying that increasing wildfire risk and soaring construction costs have prompted them to stop writing new policies in the nation’s most populous state.

State Farm announced last week it would stop accepting applications for all business and personal lines of property and casualty insurance, citing inflation, a challenging reinsurance market and “rapidly growing catastrophe exposure.” The decision did not impact personal auto insurance.

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Allstate, another insurance powerhouse, announced in November it would pause new homeowners, condo and commercial insurance policies in California to protect current customers.

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California’s unsettled market aligns with trends across the country in which companies are boosting rates, limiting coverage or pulling out completely from regions susceptible to wildfires and other natural disasters in the era of climate change. Florida and Louisiana have struggled to keep healthy insurance markets following extensive damage from hurricanes. Premiums are rising in Colorado amid wildfire threats, and an Oregon effort to map wildfire risk was rejected last year because of fears it would cause premiums to skyrocket.

Scientists say climate change has made the West warmer and drier over the last three decades and will continue to make weather more extreme and wildfires more frequent and destructive. In recent years, California has experienced the largest and most destructive fires in state history.

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According to data compiled by the industry-supported Insurance Information Institute, California has more than 1.2 million homes at risk for extreme wildfire, far more than any other state.

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Before their announcements, State Farm and Allstate both had been seeking significant rate increases.

Consumer Watchdog, a nonpartisan advocacy group, said State Farm’s decision was unlawful.

“Insurance companies can’t just stop selling insurance to consumers in order to make more money for themselves,” Harvey Rosenfield, the author of Proposition 103 [which allows the state insurance commissioner to reject proposed rate increases and order refunds,] and the founder of the group, said in a statement. “They have to open their books and get the (state) insurance commissioner’s approval.”

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