State Farm said Friday, May 26, that it will stop accepting new applications for personal and commercial property insurance in California, citing rising construction costs and its “rapidly growing catastrophic exposure.” In this photo, property burns during the LNU Lightning Complex fire in Pope Valley, Calif., on Aug. 20, 2020. (Max Whittaker/The New York Times)
State Farm said Friday, May 26, that it will stop accepting new applications for property and personal and commercial casualty insurance in California, citing rising construction costs and its “rapidly growing catastrophic exposure.”
The policy change goes into effect on Saturday, May 27, State Farm said. The change does not apply to existing personal auto insurance or homeowners insurance policies in the state.
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In a statement, the company said it would work with the California Department of Insurance to restore market capacity in the state.
“We take our responsibility to manage risk seriously,” the company wrote. “However, it is necessary to take these steps now to improve the financial strength of the company.”
State Farm owns the largest share of homeowners insurance policies in the US, controls about 9% of the market, and writes at least $70 billion in premiums.
In recent years, property insurers have dropped coverage for tens of thousands of homeowners across the state in the wake of the devastating wildfires.
The Ricardo Lara Insurance Commission in September 2022 invoked a law signed in 2018 by the then governor. Jerry Brown prohibiting insurance providers from canceling or refusing to renew plans for properties affected by wildfires for up to 12 months after the fire.
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A moratorium on insurance price increases during the pandemic only added to the tension within the insurance industry.
“The risks are getting worse and rates are going to have to go up to ensure insurers are solvent and operational in California,” Seren Taylor, a top legislative advocate for the California Personal Insurance Federation, told the Bay Area News Group in August 2022. . .
In 2019, Lara ordered California’s FAIR Plan, an insurance plan of last resort, to expand its coverage beyond fire to include liability, theft and other parts of the homeowner’s policy. Insurance companies, which administer and fund the state-created FAIR Plan, have challenged the new rules in court.
In March, Insurance Commissioner Ricardo Lara and the FAIR Plan administrators agreed to double the plan’s commercial coverage limits to $20 million for businesses such as homeowners associations that were unable to find insurance through traditional providers.