From the San Francisco Chronicle, February 23:
California’s home insurance market is running out of worst-case scenarios. But one threat still looms large: further pullback or even a complete exit by its biggest player by far, State Farm General.
It has been just under a year since State Farm sent state regulators a letter indicating the company was concerned about its financial stability. Its policyholder surplus, a key metric reflecting its ability to pay claims, dropped from $4 billion in 2016 to just over $1 billion last year.
An insurance company has different levers it can pull if it’s concerned about its financial state. It can stop taking new customers. It can raise its rates on current customers. It can also not renew existing customers.
State Farm has pulled all of these levers to varying degrees already. In May 2023, the insurer announced it was issuing a blanket pause on writing new homeowners policies in California. In March 2024, when it first sent regulators its letter flagging financial worries, the company said it would not renew approximately 30,000 homeowners policies and completely withdraw from California’s apartment landlord market, leaving behind 42,000 more customers. That same month, State Farm began implementing an average 20% price hike for its existing customers.
In the wake of last month’s devastating Los Angeles wildfires, the company warned its future financial woes could trigger a “dire situation” for both State Farm customers and the California market as a whole. It could in theory pull its last lever of all — exiting the California market, sparking chaos for one million homeowners, in addition to its multitude of commercial policies, and the market as a whole.
State Farm has spelled out for state regulators exactly what it wants: expedited approval of a 22% price hike for consumers, even those who don’t live in high-risk areas. That, in turn, leaves regulators with a dilemma: capitulate to this demand and let consumers pay more, or potentially risk even more consumers losing their insurance....
....MUCH MORE
Previously:
June 2021 - "The Wildfire West: Where Housing Sprawl and Wildfire-Prone Areas Collide"
May 2023 - "State Farm Halts Home-Insurance Sales in California"
June 2023 - Wildfire: "Living in the Danger Zone"
July 2023 - RISK: "State Farm is right. California can’t keep building housing in high-risk places"
September 2024 - "As wildfire risks intensify, California insurance rates keep rising"
January 2 - "Calif. will force insurers to cover fire-prone areas. But rates will rise."
February 12 - California's High-Risk Property Insurance Plan Assesses Commercial Insurers $1 Billion To Keep From Going Broke
February 12 - Insurance: State Farm Asks California For 22% Emergency Rate Hike, Doesn't Seem Very Good At This Property/Casualty Business
And many more.
It's not as if this stuff just crept up on the insurers and California's government.
