State Farm said Friday, May 26, that it will stop accepting new applications for personal and business property and casualty insurance in California, citing rising construction costs and its “rapidly growing catastrophe exposure.”
The policy change is effective Saturday, May 27, State Farm said. The change does not apply to personal auto insurance or existing home insurance policies in the state.
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In a statement, the company said it would work with the California Department of Insurance to restore market capacity in the state.
“We take seriously our responsibility to manage risk,” the company wrote. “However, it’s necessary to take these actions now to improve the company’s financial strength.”
State Farm holds the largest share of property insurance policies in the U.S., controlling about 9% of the market and writing at least $70 billion in premiums.
Property insurers in recent years have pulled coverage from tens of thousands of homeowners across the state in the wake of devastating wildfires.
Insurance Commission Ricardo Lara in September 2022 invoked a law signed in 2018 by then-Gov. Jerry Brown prohibiting insurance providers from canceling or refusing to renew plans for properties affected by wildfires until 12 months after the fire.
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A moratorium on insurance price increases during the pandemic only heightened tension 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 advocate with the Personal Insurance Federation of California, told the Bay Area News Group in August 2022.
Lara in 2019 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 a homeowner’s policy. Insurance companies, which manage and fund the state-created FAIR Plan, have challenged the newer rules in court.
In March, Insurance Commissioner Ricardo Lara and the FAIR Plan administrators agreed to double the plan’s commercial coverage limits to $20 million for businesses such as homeowners associations that were unable to find insurance through traditional providers.
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