Insurers must be able to charge rates that reflect increased climate change risks and reinsurance costs, the American Property Casualty Insurance Association said in a statement on Saturday.
Its comments came after State Farm General Insurance Co., the homeowners unit of State Farm Group, announced Friday that it will no longer write new commercial and personal property and casualty insurance in California.
“State Farm General Insurance Co. made this decision due to historic increases in construction costs that outpaced inflation, rapidly growing catastrophe exposure and a challenging reinsurance market,” the Bloomington, Illinois-based insurer said in a statement.
The decision was necessary to improve the company̵
7;s financial strength and does not affect personal auto coverage, State Farm said.The factors driving State Farm’s decision are “beyond our control” and include climate change, reinsurance costs and global inflation, the California Insurance Department responded in a statement.
Current State Farm customers will not lose their insurance but no renewals are taking place, CDI said.
“The busy market continues to struggle with inadequate prices that do not cover the increased risks caused by climate change and the growing number of wildfire-prone communities,” said Mark Sektnan, APCIA’s vice president of state government relations.
The insurers are committed to California and look forward to working with CDI and policymakers to enact solutions, he said.
State Farm has a 20.6% share of the California homeowner multi-peril market, a 2.5% share of the fire market and a 6.8% share of the commercial multi-peril market, based on 2022 data from the rating agency AM Best.
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