State Farm suspends new property insurance policies in California – Orange County Register

State Farm said Friday, May 26, it would stop accepting new claims for personal and business property insurance in California, citing rising construction costs and its “rapidly growing catastrophe exposure.” Seen here, property burns during the LNU Lightning Complex fire in Pope Valley, Calif. on August 20, 2020 (Max Whittaker/The New York Times)

State Farm said Friday, May 26, it would stop accepting new property and casualty insurance claims in California, citing rising construction costs and its “rapidly growing catastrophe exposure.”

The policy change for personal and business lines will go into effect Saturday, May 27, State Farm said. The change does not apply to personal auto insurance or existing home insurance policies in the state.

SEE MORE : Property developments could be delayed due to insurance difficulties

In a statement, the company said it would work with the California Department of Insurance to restore marketability 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 has the largest share of property and casualty insurance policies in the United States and controls about 8.3% of the California market, underwriting at least $7 billion in premiums, according to 2021 data compiled by the state.

RELATED: California homeowners could continue to lose insurance as wildfire threat looms

Michael Soller, spokesman for the California Department of Insurance, said Friday evening via email that State Farm’s policy change was among factors “beyond our control, including climate change, reinsurance costs affecting the ‘Whole Insurance Industry and Global Inflation’.

Instead, the DOI is focused on “consumer protection” through its Safer from Wildfires discount program, Soller said.

Established in October 2022 and billed as the first of its kind, the state program requires insurers to reduce policies for homeowners who mitigate wildfire threats by installing fire roofs, closing overhangs roofs and creating areas resistant to embers. Insurance companies have 180 days to submit a wildfire risk assessment or score, which the state can appeal.

In recent years, property insurers have withdrawn coverage for tens of thousands of homeowners across the state following devastating wildfires.

DOI Commissioner Ricardo Lara invoked a law in September 2022 – signed in 2018 by the then-Governor. Jerry Brown – prohibiting insurers from canceling or refusing to renew plans for properties affected by wildfires until 12 months after the fire.

RELATED: FAIR plan calls for nearly 50% increase in Department of Insurance premiums

A moratorium on insurance price hikes during the pandemic has only heightened tensions within the insurance industry.

“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 senior legislative attorney for the Personal Insurance Federation of California, 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 policy. owner. Insurance companies, which manage and fund the state-created FAIR plan, have challenged the new rules in court.

In March this year, administrators of the FAIR plan agreed to double the plan’s commercial coverage limits to $20 million for businesses such as homeowners associations that have been unable to find insurance from traditional providers. .

The number of California properties facing serious wildfire risk is expected to increase sixfold in 30 years, according to the nonprofit First Street Foundation.

The DOI offers updates on consumer rights and options on its website. Its consumer helpline is 1-800-927-4357.

Writer Ethan Varian and CalMatters contributed to this report.

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