A home for sale near Emerald Bay in Lake Tahoe, California, U.S., on Monday, Sept. 7, 2020. With many companies from the tech-heavy Bay Area embracing remote work, the towns surrounding the sprawling freshwater lake are becoming a refuge for San Francisco and Silicon Valley's elite. - Bloomberg
WASHINGTON: California residents now have fewer options to insure their homes, after State Farm General Insurance Co announced it’s no longer accepting new applications for property and casualty coverage in the state.
State Farm, one of the biggest property and casualty insurers in California and the United States, pointed to growing “catastrophe exposure” and substantial increases in construction costs for its decision, which took effect on Saturday.
The move affects both business and personal applications. It doesn’t impact personal auto insurance.
“We take seriously our responsibility to manage risk” and recognise the state for their efforts to mitigate wildfire loss, State Farm said in a statement on its website.
“However, it’s necessary to take these actions now to improve the company’s financial strength.”
The decision comes as Californians confront worsening wildfire risks escalated by climate change over recent years.
The state has sought to ease the burden on property owners by introducing a regulation last year that requires insurers to reward home and business owners for their fire mitigation efforts.
But while residents grapple with devastating property damage from fires, insurance giants have dished out lofty payouts that impact profitability and leave them in the red.
Insurers have increasingly resorted to “non-renewals,” or discontinuing coverage for a policyholder’s property or area, putting residents vulnerable to fires in even more of a financial bind.
About 13% of all voluntary market homeowners and dwelling fire policies were not renewed by insurance companies in 2021, according to state data.
There have been 985 wildland fire incident responses in California since the beginning of 2023, as well as nearly 20,000 responses to other fires, according to state data. — Bloomberg
