State Farm General Insurance Co. has ceased accepting new applications in California for business and personal lines property and casualty insurance, effective May 27.
In an unattributed press statement, the company said it “made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.” The company, which is the leading home insurance firm in California, added that it would continue to serve existing customers in the state while accepting new applications for its personal auto insurance product.
“We take seriously our responsibility to manage risk,” the company continued. “We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California. However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions.”
State Farm is the second insurance company to exit from California’s home insurance market in two years – The American International Group withdrew pulling policies in the state in January 2022, citing risk concerns from wildfires. According to the California Department of Forestry and Fire Protection, there have been 985 wildfires in the state since the beginning of the year, with 1,024 acres burned.
Michael Soller, the Californian deputy insurance commissioner, responded to State Farm’s announcement in an emailed statement to Axios.
“The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,” Soller said. “We have been here before after major wildfires. What’s different is the actions that we are taking with the first-ever insurance discount program for wildfire safety and unprecedented wildfire mitigation investments from the Legislature and Governor.”
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