California’s already strained property insurance market is facing a new challenge as two more insurers, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., plan to withdraw from the wildfire-prone state entirely starting in July.
The two companies, units of Japan-based Tokio Marine Holdings Inc., disclosed their plans in filings submitted to the California Department of Insurance. They said the decision will affect 12,556 policies with premiums of $11.3 million.
The companies didn’t cite a reason for pulling out of the market, but major insurers across California are ending or reducing coverage as the state grapples with risks posed by wildfires and other natural disasters fueled by climate change.
The disclosure of the exit comes just a few weeks after State Farm General Insurance Co. said it will be cutting about 72,000 policies in July, just nine months after announcing it would stop offering new coverage. Several other companies have either paused new policies or will no longer offer new ones, including Allstate Corp., The Hartford, Farmers Insurance and United Services Automobile Association.
To stabilize the market and coax insurers back to California, Insurance Commissioner Ricardo Lara last year announced a new regulatory overhaul to allow insurers to factor future climate risks and reinsurance costs into their pricing. In turn, insurers will be required to offer more coverage in fire-prone areas. Many of the details have yet to be released, and the earliest the plan could go into effect is December.
Tokio Marine America and Trans Pacific didn’t immediately respond to requests for comment.
This comes as California’s property insurer of last resort told lawmakers that it’s financially unprepared to cover the costs of a major catastrophe in the state. The plan now faces $311 billion in potential losses, up from $50 billion six years ago, California FAIR Plan president Victoria Roach said in a state legislative hearing.
The Hartford in January said it will discontinue writing new homeowners policies in California.
Liberty Mutual in July 2023 said it will stop offering its business owner’s policy (BOP) product in wildfire-prone state California. That same month Farmers said it will limit new homeowners insurance policies in California.
Eight of the state’s top 20 wildfires have occurred in the last half-dozen years, burning 8,512 structures, according to the Western Fire Chiefs Association. Those losses do not reflect the destruction from the Camp Fire in 2018, the state’s most destructive and deadliest fire, which destroyed 18,804 structures and cost over $16.5 billion.
A report from Gallagher Re last year shows the threat of damaging wildfires in conjunction with inflation and pricing challenges has led to a distressed insurance and reinsurance market, particularly in California.
Top photo: Homes in Santa Clarita, California.
Copyright 2024 Bloomberg.
Topics California Carriers Property
FAQs
California's already strained property insurance market is facing a new challenge as two more insurers, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., plan to withdraw from the wildfire-prone state entirely starting in July.
Why are insurance companies pulling out of California? ›
The companies are blaming wildfires, inflation that raised reconstruction costs, higher prices for reinsurance they buy to boost their balance sheets and protect themselves from catastrophes, as well as outdated state regulations — claims disputed by some consumer advocates. How is this pullback affecting homeowners?
What insurance companies are leaving California in 2024? ›
From summer 2023 to early 2024, five other companies — AmGUARD, Falls Lake, The Hartford, Tokio Marine Insurance Co, and American National — stopped writing new home insurance policies in California, putting immense strain on the home insurance market. California homeowners have found themselves scrambling for coverage ...
Why are major insurance companies leaving the marketplace? ›
California's insurance exodus
Industry giants State Farm and Allstate were among those who declared their decision to cease accepting insurance applications for all business and personal property, with both citing increased business costs and the heightened risk of natural disasters, particularly wildfires.
Why is Geico pulling out of California? ›
The conditions in the state have led the insurers to believe that California drivers are too expensive to insure. Auto accidents increased 25% between 2020 and 2021, where at the time, premiums increased only 4.5%. The insurers were paying more in claims than they were making in premiums.
Is Allstate pulling out of California? ›
Allstate stopped issuing new insurance policies for all business and personal property in California back in 2022. Since then, companies like State Farm, Farmers Insurance and The Hartford have made similar business moves.
Is State Farm pulling out of California? ›
When will the change take effect? Starting in July 2024, State Farm will stop insuring more than 30,000 residential homes in California, and starting in August, will discontinue coverage on 42,000 commercial apartment properties.
Is Progressive leaving California? ›
Since the beginning of 2023, several major insurance companies have announced that they would stop writing policies or drastically reducing offerings in two of the three most populous states in the U.S. Industry heavyweights such as Geico, Progressive, and Farmers have started leaving the California and Florida auto ...
Is USAA pulling out of California? ›
Since May, several large and small property insurance providers, including Allstate, State Farm, Farmers and USAA, have decided to limit business or leave California altogether.
Who is still insuring homes in California? ›
6 Best Homeowners Insurance Companies in California
- Nationwide: Our top pick for California.
- USAA: Our pick for club members.
- Liberty Mutual: Our pick for discounts.
- Progressive: Our pick for bundling.
- Farmers: Our pick for customizable coverage.
- Hippo: Our pick for fast quotes.
American National confirmed it's pulling out of the California home insurance business citing severe weather events in recent years and a lack of profitability as reasons behind the exit.
Why is farmers insurance pulling out of California? ›
Farmers Auto Insurance announced it is pulling out of California. The insurance company says this shut down is to increase operational efficiency an manage risk exposure. ABC 10News Reporter Perla Shaheen spoke with a customer affected by the shutdown.
What is the cheapest homeowners insurance in California? ›
Travelers has the cheapest homeowners insurance in California, charging $901 a year. However, low rates and good ratings make Nationwide California's best home insurance company. Home insurance rates on average range from $1,087 a year in San Jose to $1,466 in Los Angeles.
Why are insurance companies not writing new policies in California? ›
A growing number of property insurers have paused or stopped writing policies in California in recent years, citing increased fire risk and inflation.
What insurance companies will not do business in California? ›
According to filings from the state's Department of Insurance, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. said they would both stop offering homeowners and personal umbrella insurance in the Golden State. Both entities are subsidiaries of Tokio Marine Holdings Inc., a Japanese company.
How many companies are moving out of California? ›
More than 265 business headquarters are leaving California, with an average of 6.3 departing per month. California has a progressive personal income tax law.
Is Liberty Mutual pulling out of CA? ›
"It just saddens me that these companies are just fleeing from California for different reasons." It's another blow to homeowners across the state. Liberty Mutual fire insurance company is the latest company ending fire insurance in California. SAN FRANCISCO (KGO) -- It's another blow to homeowners across the state.
Why is farmers insurance leaving California? ›
Farmers Auto Insurance announced it is pulling out of California. The insurance company says this shut down is to increase operational efficiency an manage risk exposure. ABC 10News Reporter Perla Shaheen spoke with a customer affected by the shutdown.
