On average, California sees 7,000 wildfires every year|Jeff Head|Public domain
State Farm has halted selling new home insurance policies in California because the increased frequency of wildfires has seen a hike in fire damage claims, taking a toll on the insurance giant’s finances.
In a statement, State Farm cited rising construction costs, growing catastrophe exposure and a challenging reinsurance market for the decision. Existing auto insurance policies remain unaffected.
Administration
California’s insurance commissioner, Ricardo Lara, implemented price control and a one-year moratorium to safeguard fire-affected counties from insurance cancellations and nonrenewals.
Not unique
State Farm’s decision to halt coverage in California is not unique. Due to wildfire concerns, American International Group withdrew insurance to California last year. Similar insurance challenges have been observed in Louisiana and Florida, with insurers pulling out and increasing prices.
Additionally, California has experienced unprecedented wildfires in the past six years, including some of the largest and deadliest in US history. On average, the state sees 7,000 wildfires every year.