US insurance giants close California homeowner applications, wildfires blamed

Two providers are no longer issuing new policies for the West Coast US state, a direct result of climate change, while authorities brace themselves for major public transport cuts.

city skyline during night time

State Farm and Allstate, two of the largest property and casualty insurance providers in the US, have announced they will no longer sell homeowner policies covering addresses in California due to wildfires. 

Florida and Louisiana are facing similar issues caused by the increasing prevalence of hurricanes and flooding. Sky-high premiums are becoming the norm, in some case up to four-times more than the national average.

Last year, Environment Journal published an investigation into the climate litigation and contract law ‘boom’, with legal cases holding high-impact businesses and organisations to account rapidly increasing, including those against national governments. Meanwhile, the insurance industry is moving into an increasingly environment-wary direction, conducting stress tests linked to the likelihood of natural disasters with far more vigor.

‘We take seriously our responsibility to manage risk. We recognise the Governor’s administration, legislators, and the California Department of Insurance (CDI) for their wildfire loss mitigation efforts. We pledge to work constructively with the CDI and policymakers to help build market capacity in California,’ State Farm said in a statement.

‘However, it’s necessary to take these actions now to improve the company’s financial strength. We will continue to evaluate our approach based on changing market conditions. State Farm independent contractor agents licensed and authorised in California will continue to serve existing customers for these products and new customers for products not impacted by this decision,’ it continued. ‘State Farm General Insurance Company, State Farm’s provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance.’

Worryingly, this comes at a time when California is also facing huge challenges maintaining its public transport infrastructure as post-pandemic ridership fails to recover due amid leaps in pricing triggered by losses incurred during lockdowns. According to some reports, the statewide deficit could be as much as $25billion, raising the spectre of significant service cuts and reduced timetables.

San Francisco and the metropolitan area’s BART (Bay Area Rapid Transit) is among the networks of concern, with proposals to stop weekend services altogether. The United Nations has previously identified decarbonising all forms of transport as a priority in order to reach net zero and slow climate change, with investment in low and zero emission shared, active and public transport systems a vital part of this. 

More on climate change and insurance: 

Legally bound: The climate litigation and contract law boom

Serious risks of flooding in basement properties warns Mayor of London

Households urged to prepare for flooding this winter


Image: Jesus Curiel





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