Trade group responds to State Farm’s California pullback
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Insurers need to be able to charge rates that reflect increased climate change risks and reinsurance costs, the American Property Casualty Insurance Association said Saturday in a statement.
Its comments came after State Farm General Insurance Co., the homeowners unit of State Farm Group, announced Friday it will no longer write new commercial and personal lines property and casualty insurance in California.
“State Farm General Insurance Co. made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the Bloomington, Illinois-based insurer said in a statement.
The decision was necessary to improve the company’s financial strength and does not impact personal auto coverage, State Farm said.
The factors driving State Farm’s decision are “beyond our control” and include climate change, reinsurance costs and global inflation, the California Insurance Department responded in a statement.
Current State Farm customers will not lose their insurance and no non-renewals are taking place, the CDI said.
“The admitted market continues to struggle with inadequate rates that don’t cover the increased risks caused by climate change and the growing number of communities in wildfire-prone areas,” said Mark Sektnan, APCIA vice president for state government relations.
Insurers are committed to California and look forward to working with CDI and policymakers to enact solutions, he said.
State Farm has a 20.6% share of the California homeowners multi-peril insurance market, a 2.5% share of the fire market, and a 6.8% share of the commercial multi-peril market, based on 2022 data from ratings agency A.M. Best.
