State Farm & Allstate won’t write new home policies in California

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Here is Chatgpt’s tl;dr version
TL;DR version:


State Farm, California’s largest property and casualty insurer, has stopped writing new homeowners’ policies in the state due to concerns about wildfires, rising construction costs, and reinsurance challenges. While some worry about potential rate increases and difficulty finding insurance, experts believe there are still over 100 other insurers operating in California. Existing State Farm customers are unaffected, and the company will continue to write new auto policies. State Farm’s decision may not be permanent, as insurers have paused and restarted policies before. However, consumer advocates express concerns that this move could prompt other insurers to follow suit and put pressure on regulators to increase rates. Insurers are also pushing for looser regulations and higher rates in California, where the regulatory environment is considered challenging. Homeowners who struggle to find insurance can turn to the FAIR Plan, a state-backed insurance option that offers coverage but at higher costs and with limited coverage compared to traditional insurance.

Here’s the tl;dr(tl;dr):


State Farm has stopped issuing new homeowners’ policies in California due to concerns about wildfires, rising construction costs, and reinsurance challenges. Existing customers are unaffected, and there are still many other insurers in the state. The move may prompt other insurers to follow suit, potentially leading to higher rates. Homeowners can turn to the FAIR Plan as a temporary insurance option, but it offers limited coverage and higher costs compared to traditional insurance.

Your thoughts?

My thoughts are that the state of California shouldn’t expect the rest of the country to subsidize their risk.

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I’ve spent years looking at the marginal costs of adding cat exposure given an aggregation (or a lack of aggregation) of risk.

Even if my most recent set of cat treaty renewals hadn’t been so ugly, my reaction to the article would have been “well, duh!”

Admittedly, I haven’t kept tabs on the size of State Farm’s property book in California, and how their PML’s compare to their capitalization, so maybe my reaction is a little naïve, but I’ve been through the hard discussion of “we have too much exposure to [peril X] in [geography Y]” or “we can’t charge enough to cover the cost of our exposure to [peril X] in [geography Y]” multiple times in my career…so I’m comfortable making an educated guess at what sorts of things are influencing a probably rational decision on State Farm’s part.

It’s interesting seeing an aspect of the work I do making the news, although it’s a shame that many online armchair pundits seem to lack the math/stats/finance skills to appreciate the reasoning that’s behind these kinds of decisions.


The CDI just made it much more cumbersome to write Property insurance in California through this recent wildfire regulation they pushed through after incorporating 0 input from industry groups.

Meanwhile they force insurers to file rates through a tool that doesn’t allow large loss smoothing, contemplation of reinsurance, etc.

Property insurance will just go the way of EQ from the 90s, fully state underwritten.


When my son bought his house, SF wouldn’t write a HO policy so he went with Geico and switched his auto.

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Didn’t they pull out of Florida a while back? In tornado/hail states they changed the way they handle coverage for storm damaged roofs.

I’m reluctant to file claims for our recently hail damaged autos, but if I don’t and we were to have a wreck they would devalue our cars bc of the damage.

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Don’t know about SF and FLA but could be as a bunch of insurers have pulled out of FLA.


Yes or at least planned to. This is from Jan 2009:

And then in Dec 2009 they changed their mind: State Farm drops plan to leave Florida


What you will see now is a “public” reinsurer in California taking on the risk for the homeowners at a subsidised rate.

Definitely headed down the FL route now.

Because California is great at handling money

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Opinion column on the subject at the WSJ (should be a non-paywalled link):


One might note that the first link here is the formal withdrawal plan State Farm filed with FL OIR; thereby, it wasn’t just a “plan to withdraw” but more of actively following the regulations and statutes of FL to carry out the withdrawal. This was done some time well after State Farm stopped accepting new business.

One might note in that second link that State Farm was allowed to implement a rate increase (note, the OIR had categorically and summarily rejected any rate filing where an overall increase was proposed. And this was in the context of the company showing a substantial loss (e.g., something like a 125% combined ratio) on its non-cat and non-hurricane experience.

And when this agreement took place, Citizens (the state-owned insurer of last resort) was the #1 insurer in the state by market share. And Citizens doesn’t go insolvent, it settles claims for dimes on the dollar and assesses the shortfall to companies still writing in the state in proportion to their market share (which State Farm was still in the top 5).

Last I checked, the only state-run insurance funds for CA is for earthquake exposure.

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One other thing to keep in mind about CA insurance landscape that is quite different from any other state:

There is a citizen’s “Watchdog” group that has the authority to intervene in any personal lines filing. What’s not presented in the current media coverage is the actual influence this group has on filings. So it’s not 100% of the DOI’s fault for the current environment (but I believe it has a much bigger share now than it did 10 years ago).

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Today’s edition of Tangle looks at the subject:


Via Chatgpt:

TL;DR: State Farm and other insurers have stopped selling new insurance policies to homeowners in California due to increasing construction costs, growing catastrophe exposure, and a challenging reinsurance market. The left attributes the problem to climate change, while the right blames California’s insurance regulation and poor land management. The reality is a combination of factors, including climate change, ineffective policies, housing regulations, and forest mismanagement. The insurance crisis in California is a warning for other states facing climate-related events, and lawmakers need to address the issue to protect homeowners and ensure affordable coverage.

Only in California are you not allowed to contemplate climate change in insurance ratemaking


What part are you "wut?"ing?

If it’s the short-changing of settlement, a policy holder is likely to get between 60 and 80% of their assessed claim value (and let them litigate to get the rest).

This isn’t uncommon in other states for a company in receivership and being dissolved.

Sorry it sounds like the insurer pays some claims then chargers other insurers for part of it.

They sort of do, since crucially Citizens is the state-run Florida insurer they can happily lose money and rather than going bankrupt they just “assess” the private insurers for any shortfall.

Sort of what might happen in California. You have companies leave because it’s unprofitable, so California provides the coverage but loses money at it so they assess the private insurers based on their market share so private insurers end up racing to lose market share in CA so they can pay a smaller share of the shortfall until it’s 100% publicly underwritten.