Several major insurance companies have stopped accepting California homeowners for new policies because of growing wildfire risks. As the number of fires in the state increases and other factors escalate, insurance companies worry about the risk — and the expense.
In 2022 there were over 5,000 wildfires, according to Cal Fire, that burned about 118,000 acres. Already this year 4,337 fires have burned over 114,560 acres.
Residents in high-risk fire areas or hurricane regions need homeowners’ insurance — and lenders require it. No insurance, no home loan. More people are moving into the interface, costing insurance companies too much to repair and replace houses while battling inflation, said Janet Ruiz with the Insurance Information Institute. Two insurance giants withdrew from California’s home insurance marketplace, explaining that increasing wildfire risk and soaring construction costs have resulted in their decisions to stop writing new policies in the state. State Farm announced last week it would stop accepting applications for all business and personal lines of property and casualty insurance, according to the Associated Press. The company cited inflation, a challenging reinsurance market, and rapidly growing catastrophe exposure.
“We take seriously our responsibility to manage risk,” State Farm said. “It’s necessary to take these actions now to improve the company’s financial strength.”
Unlike heavyweights State Farm and Allstate, which declined to sign new homeowners in the state, AmGUARD and Falls Lake will also drop their existing policyholders.
Allstate, another insurance powerhouse, announced in November it would pause new policies for homeowners, condos and commercial properties in California to protect current customers.
Homeowners may have to turn to the California FAIR Plan, which provides basic fire coverage, if they aren’t able to find an insurer that will cover fire expenses. The high-risk pool known as the FAIR Plan is not a government entity or a state program. Taxpayers do not fund the FAIR Plan — it’s supported by all carriers licensed to do business in California, which spreads the risk among all the insurance carriers. Because the FAIR Plan is a high-risk policy, people should expect to pay more than they would for a standard homeowner policy.
The San Francisco Standard reported last week that two more companies quietly left the California market, further narrowing options for those trying to insure their home or purchase one with a mortgage.
AmGUARD Insurance — a subsidiary of Berkshire Hathaway GUARD Insurance Companies — will withdraw its homeowners and personal umbrella programs, and Falls Lake Insurance will also end its homeowners program. Both companies made the announcements July 21 in little-noticed filings submitted to the state regulator. AmGUARD and Falls Lake are the latest insurers to end or limit their business in the state during the past year.
Unlike heavyweights State Farm and Allstate, which declined to sign new homeowners in the state, AmGUARD and Falls Lake will also drop their existing policyholders. Safeco plans to drop 950 policies in October in San Francisco and the East Bay.
An SFGATE report noted that State Farm held the most policies in the California property market in 2021, and the company experienced about a 60 percent loss that year.
