![]() ![]() Rex Frazier, president of the Personal Insurance Federation of California, an industry group, admits that State Farm’s move can’t be entirely explained by mispriced wildfire risks. “But it’s really more complicated than that,” she said, and could have as much to do with a bad year on the stock market hurting the company’s investment income as California’s fire risk. “It’s a convenient excuse to blame the commissioner and blame Prop 103 and blame the rate-making process. “The idea that their decision is because they’re not getting the rate increases they want, that’s really not true,” Amy Bach, executive director of consumer advocacy group United Policyholders, told the Times. The company is now sticking with the high-risk properties it signed since 2018, and has explicitly committed to renewing its existing policies.Ĭonsumer advocates suspect that the political impact of the State Farm announcement is as significant as the business logic behind it. In the face of regulatory headwinds – including Proposition 103 and the other state regulations against raising premiums – State Farm spent the last five years diving deeper into California’s market. State Farm, the largest insurer in California for decades, has added more homeowners in high fire-risk zones.Īs other insurers abandoned the Golden State, State Farm saw its market share grow to 21.2 percent, from 17.8 percent in 2018, which added more than $1 billion in premiums to its books. ![]() It also said the pause would “improve the company’s financial strength.”īut there’s a more complicated calculus, according to the Times. ![]() When the 101-year-old insurer announced in May it would stop writing new homeowners insurance policies in the state, it cited “historic increases in construction costs,” “rapidly growing catastrophe exposure and a challenging reinsurance market.” The Illinois-based company’s move may reflect other considerations, from applying political pressure to staying on the right side of financial regulations, the Los Angeles Times reported. There may be more to State Farm Insurance’s pullback from the California homeowners insurance market than wildfire risk. Reserves requirement may put financial pressure on insurer to slow growth ![]()
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