Prompted by devastating wildfires, the rising cost of building materials and other economic headwinds,  State Farm Insurance announced in May that it would no longer sell new home insurance policies in California, along with another large insurer in the state, Chubb. These carriers join Allstate Insurance, which in November of 2022 stated that it would not only stop writing new homeowners policies, but also condominium and commercial insurance risks. Other insurers that have recently pulled out of California’s home insurance marketplace include AIG and Farmers.

According to Insurance Business Magazine, for every premium dollar that comes in, insurance carriers are having to pay out $1.50 in claim losses — a business model that simply isn’t sustainable. As a result of this increasingly challenging market, California state regulators are looking to the insurance industry to help find solutions.

“I think the state could work with the carriers a bit better to find out where these rates need to sit,” said Robbie Arnold, managing director at the global service provider Charles Taylor. “The problem is [state regulators] don’t know how to price things out appropriately. And if the state doesn’t want to approve rate increases, they handcuff carriers into making decisions on whether to stop writing policies or withdraw from the state.”1

Carriers that have elected to remain in the state will likely face enormous natural catastrophic risk exposures — especially when it comes to wildfire events. In response and in an effort to help control costs it is expected that these insurers will feel the pressure to try and offset risks by not only increasing rates, but also in the tightening of underwriting criteria such as the inclusion of special coverage limitations and higher deductibles. Experts believe that the state needs to work with carriers at a deeper level to determine where rates need to be in order to be profitable and how this is all going to work moving forward.

In today’s insurance market, it’s difficult to say just how many more insurers may exit California. As time progresses, experts believe that it will become even more difficult for consumers to secure policies.  However, this challenging situation may very well create new opportunities for carriers that remain and for aggressive newcomers to the market that are willing to come into the state and write the business.

Kristi W. Dean, Managing Partner

Stone Dean LLP

Kristi is an experienced litigator and transaction attorney who represents clients in business transactions and litigation disputes. Her litigation practice focuses on trade secrets, unfair business competition, insurance law and complex business disputes, with a focus on insurance-related issues. Kristi can be reached at 818-999-2232 or

Notify of
Inline Feedbacks
View all comments