State Farm can’t dip below $458 million in reserves as a baseline, and would trigger higher scrutiny from regulators if its surplus fell below three times that, or $1.37 billion, according to the latest filings in late 2021. Insurance companies, like banks, must keep a certain amount of cash on hand to make good on claims from a disaster. The homeowners insurance market in California has risen from $8.2 billion in premiums in 2018 to more than $12 billion today, with State Farm’s share rising from a little under $1.5 billion to more than $2.5 billion, largely on the back of rising construction costs.įrazier said that this jump might put State Farm in a financial bind. “It’s a convenient excuse to blame the commissioner and blame Prop 103 and blame the rate-making process. “The idea that their decision is because they’re not getting the rate increases they want, that’s really not true,” Amy Bach, executive director of consumer advocacy group United Policyholders, told the Times. The company is now sticking with the high-risk properties it signed since 2018, and has explicitly committed to renewing its existing policies.Ĭonsumer advocates suspect that the political impact of the State Farm announcement is as significant as the business logic behind it. In the face of regulatory headwinds – including Proposition 103 and the other state regulations against raising premiums – State Farm spent the last five years diving deeper into California’s market. State Farm, the largest insurer in California for decades, has added more homeowners in high fire-risk zones.Īs other insurers abandoned the Golden State, State Farm saw its market share grow to 21.2 percent, from 17.8 percent in 2018, which added more than $1 billion in premiums to its books. But there’s a more complicated calculus, according to the Times.
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