Insurance giant State Farm to stop insuring homes in California, citing catastrophic wildfires and rapidly rising inflation costs that have put polices at a premium
- State Farm has announced that they are stopping the sale of new home-insurance policies in California from Saturday
- The company, one of California’s biggest insurers, said it had taken the decision due to the frequencies of wild fires and the high costs of rebuilding
- Existing policy holders will not be affected, and the company will still sell car insurance in the state
America’s biggest home insurance company has announced it will no longer insure houses in California, saying that the risk from wildfires was too great and the cost of rebuilding too high.
State Farm, the nation’s biggest car 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 offering auto insurance.
State Farm said it ‘made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.’
In its statement, State Farm said it takes ‘seriously our responsibility to manage risk.’
The Bloomington, Illinois-based company said it was ‘necessary to take these actions now to improve the company’s financial strength.’
They added: ‘We will continue to evaluate our approach based on changing market conditions.’
State Farm’s move follows the decision last year by American International Group to end the insurance policies taken out on thousands of expensive properties. The group notified their high-net-worth clients in California that their policies would not renew.
The notices were part of a plan by AIG to cease selling home policies in California through a unit regulated by the state’s insurance department.
Michael Soller, a deputy insurance commissioner for California, told The Wall Street Journal that the state was working hard to reduce wildfire risk.
He said they were ‘really going after the root causes of the insurance issues, which is the wildfire risk’.
Soller said California has created an insurance-discount program that takes into consideration wildfire-mitigation investments by consumers.
‘The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,’ said Soller.
The Environmental Protection Agency, in their section devoted to California’s wildfires, confirm the situation is worsening.
‘Wildfires, a longstanding and frequent threat to California, are expected to increase in intensity and frequency due to climate change,’ they state.
The five largest blazes recorded in the state have all occurred since 2018, according to the California Department of Forestry and Fire Protection.
