State Farm’s homeowners insurance business has stopped accepting applications from within California, citing “necessary” actions to improve the company’s financial strength.
State Farm General Insurance Company no longer accepted new applications, including all business and personal lines property and casualty cover, effective May 27, the insurance giant said in a news update. Personal auto insurance is not affected by the move.
The carrier blamed historic rising construction costs outpacing inflation, “rapidly” growing catastrophe exposure, and a difficult reinsurance market for the change.
“We take seriously our responsibility to manage risk,” State Farm said in the news update. “We recognize the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts.”
State Farm said it “pledged to work constructively” with policymakers and the California Department of Insurance (CDI) to assist in building insurance market capacity in the state.
“However, it’s necessary to take these actions now to improve the company’s financial strength,” State Farm said. “We will continue to evaluate our approach based on changing market conditions.
“State Farm independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision.”
State Farm is the largest homeowners insurance provider in the state, according to rankings from the Insurance Information Institute (Triple-I).
Other insurers have looked to pull back from the wildfire hit market in recent times. In February, Farmers Insurance reportedly cancelled or dropped renewals for hundreds of condo units in San Diego, California.
Last year, the Wall Street Journal reported both AIG and Chubb were cutting back coverage for high net worth homeowners in the state.
The CDI has sought to counter any coverage dearth by slapping a one-year moratorium on carriers non-renewing homeowners business in fire hit areas. It has also moved to require insurance discounts under its Safer from Wildfires framework.