Insurance giant State Farm to stop insuring new homes in California, citing catastrophic wildfires
America's biggest home insurance company has announced it will no longer insure houses in California, saying that the risk from wildfires was too great and the cost of rebuilding too high.
State Farm, the nation's biggest car and home insurer by premium volume, said existing customers would not be affected.
But from Saturday, no new home insurance policies will be issued. The company will continue offering auto insurance.
State Farm said it 'made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.'
In its statement, State Farm said it takes 'seriously our responsibility to manage risk.'
A firefighter is seen battling the Camp Fire as it rages through Paradise, California in November 2018. State Farm will no longer insure homes in California, due to the risks
The charred remains of Paradise, California are seen in December 2018, following the devastating Camp Fire
State Farm is the nation's largest car and home insurer by premium volume
The Bloomington, Illinois-based company said it was 'necessary to take these actions now to improve the company's financial strength.'
They added: 'We will continue to evaluate our approach based on changing market conditions.'
State Farm's move follows the decision last year by American International Group to end the insurance policies taken out on thousands of expensive properties. The group notified their high-net-worth clients in California that their policies would not renew.
The notices were part of a plan by AIG to cease selling home policies in California through a unit regulated by the state's insurance department.
Michael Soller, a deputy insurance commissioner for California, told The Wall Street Journal that the state was working hard to reduce wildfire risk.
He said they were 'really going after the root causes of the insurance issues, which is the wildfire risk'.
A new report has laid bare the most disaster-prone counties in the US - unmasking communities in California and Florida as some of the most dangerous
An aerial view of the homes destroyed by the Camp Fire in Paradise, California, as seen in February 2019
Californian homes are also at risk of mudslides, as seen on February 28 in Los Angeles County
Flooding is also a high risk: homes are seen surrounded by floodwaters on January 11 in Planada
Soller said California has created an insurance-discount program that takes into consideration wildfire-mitigation investments by consumers.
'The factors driving State Farm's decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,' said Soller.
The Environmental Protection Agency, in their section devoted to California's wildfires, confirm the situation is worsening.
'Wildfires, a longstanding and frequent threat to California, are expected to increase in intensity and frequency due to climate change,' they state.
The five largest blazes recorded in the state have all occurred since 2018, according to the California Department of Forestry and Fire Protection.
Source: Daily Mail
