Firefighters work to contain wildfires near Eaton Canyon in California on Thursday, January 9, 2025. Photo: Amanda Bronstad/ALM.
State Farm is requesting approval for an emergency rate increase averaging 22% from the California Department of Insurance in wake of the LA wildfires, the company announced on Monday Feb. 3.
California’s largest home insurer is also seeking a 38% jump in rate hikes for rental dwellings and a 15% increase for tenants. The rate hikes would take effect May 1.
“With nearly three million policies in force, including more than one million homeowners’ customers, State Farm needs your urgent assistance in the form of emergency interim approval of additional rate to help avert a dire situation for our customers and the insurance market in California,” State Farm said in a letter to Insurance Commissioner Ricardo Lara.
According to State Farm, reinsurance will assist in what is owed to customers, but the costs of the fires will further deplete capital from the company. State Farm said its stressed financial position would be further weakened, even after accounting for billions of dollars in anticipated recoveries from a prudently robust reinsurance program that includes State Farm Mutual Automobile Insurance.
The company has already received 8,700 claims and paid over $1 billion to customers.
“We know we will ultimately pay out significantly more, as these fires will collectively be the costliest in the history of the company,” State Farm said in the letter to Ricardo Lara.
In January, State Farm paused non-renewals for homeowners, rental dwelling and residential community association policies in Los Angeles County.
The decision, effective as of Jan. 7, 2025, comes after the company announced in March 2024 that it would withdraw coverage of 72,000 home and apartment policies — citing inflation, regulatory costs and rising catastrophe risk for the move.
State Farm insures 250,000 homes and 880,000 automobiles in LA County. The company insures over one million homes and more than four million autos across the state.
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