State Farm Halts New Home Insurance in California Due to Wildfire Risks
State Farm recently declared its decision to discontinue offering home insurance to new clientele in California. This decision is driven by escalating wildfire threats, skyrocketing construction costs, and a demanding reinsurance market.
In a press statement, State Farm explained that inflation has not been able to keep up with the spiraling construction costs, and the catastrophe exposure has also been on a steep rise. Last year’s Mosquito Fire, the largest in the state, consumed more than 100 square miles, endangering over 9,200 structures and leading to the destruction of 70 structures. Given these circumstances, State Farm feels compelled to take steps to improve its financial stability.
However, the company also emphasized that it will continue to serve its existing customers and will actively collaborate with the California Department of Insurance and legislators to bolster market capacity in the state.
This move follows the backdrop of an increased national focus on wildfire resilience. In March, federal officials announced grants totaling $197 million to boost the resilience of communities across the United States against wildfires. California received a significant portion of this funding, amounting to $78.9 million.
The need for such preventative measures is further underscored by the severity of recent wildfires. The 2021 Dixie Fire, the largest standalone wildfire in the state’s history, incinerated around 1 million acres and demolished over 700 homes in Northern California. The preceding year, 2020, witnessed devastation on a similar scale. More than 3.4 million acres were engulfed by flames, leading to the loss of at least 36 lives, evacuation of thousands, and destruction of numerous homes.
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