State Farm Stops Writing Property Insurance in California

State Farm has announced it is no longer accepting accept new applications for property and casualty coverage in California, citing growing “catastrophe exposure” in the Golden State, which has averaged 7,000 wildfires encompassing more than 2M acres in each of the past five years.

“State Farm General Insurance Co. made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the Bloomington, IN-based insurance giant said, in a statement posted on its website.

State Farm said stopped accepting new applications for all business and personal lines property and casualty insurance, effective May 27. Personal auto insurance policies in California– are not impacted, the company said.

According to a statement issued by a California Department of Insurance (CDI) spokesperson, “it’s important to note that current State Farm customers are not affected and no non-renewals are being issued as a result of this announcement.”

In October, California became the first state in the nation to enact insurance pricing regulations requiring insurance companies to provide discounts to consumers under the Safer from Wildfires framework created by the Department of Insurance in partnership with state emergency preparedness agencies.

In its statement, State Farm acknowledged California’s new requirement linking wildfire loss mitigation efforts to insurance discounts and said it would “work constructively with the CDI and policy makers to help build market capacity in California.”

While it didn’t point the finger directly at the new regulations as a reason for its exit from policy writing in California, State Farm said it would have to improve its bottom line before it re-enters the market.

“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,” the company’s statement said.

Insurers have increasingly resorted to “non-renewals,” or discontinuing of coverage for a policyholder’s property in California. About 13% of all voluntary market homeowners and dwelling fire policies were not renewed by insurance companies in 2021, Bloomberg reported.

Affluent homeowners aren’t exempt from the cancellations: last year, one of the largest carriers offering protection for multimillion-dollar properties end coverage for some customers.

AIG notified about 9,000 customers in its Private Client Group in January 2022 that their home policies wouldn’t be renewed this year. The change is part of a plan by AIG to cease selling home policies in California through a unit regulated by the state’s insurance department.

There have been 985 wildfire incident responses in California since the beginning of 2023, as well as nearly 20,000 responses to other fires, according to state data.