State Farm stated on Friday that it is ceasing new home insurance sales in California due to the risk of wildfires and rising building expenses.
On May 27, the major insurance company in California stopped taking applications for all commercial and personal lines of property and liability insurance. Existing auto insurance is unaffected by State Farm’s decision.
State Farm General Insurance Company said in a statement that it reached this decision because of historically high construction cost increases that have outpaced inflation, rapidly expanding catastrophic exposure, and a difficult reinsurance market.
The tweet below confirms the news:
State Farm Halts Home Insurance Sales In California https://t.co/gj5OxKBKoU
— zerohedge (@zerohedge) May 28, 2023
According to information from the governor’s office, during the past five years, California has had an average of over 7,000 wildfires per year, devouring an average of over 2 million acres. The severity of the fire seasons is attributed by scientists and Californian officials to the climate problem.
The California Department of Insurance and lawmakers will be involved in building up market capacity in the state, according to State Farm, the largest provider of auto and home insurance in the US with its affiliates.
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State Farm added that it will reevaluate in light of current market circumstances, but that it was imperative to take these steps right away to strengthen the company’s financial position.
The Illinois-based insurance company declared that its agents will keep dealing with current clients.
The Wall Street Journal stated that American Insurance Group announced last year that it will stop writing coverage for expensive residences in California, in part due to the risk of wildfires.
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