The company said wildfires had cost it $1 billion so far

In the wake of the Los Angeles wildfires, Californias largest insurance provider is asking the state for an emergency rate hike of an average of 22%. State Farm General said claims from homeowners threaten the company financially.
As of February 1, State Farm General said it had received more than 8,700 fire-related claims and has already paid more than $1 billion to customers. State Farm General said it will ultimately pay out significantly more, as collectively these fires will be the costliest disasters in the history of State Farm General.
Capital is necessary so an insurance company can pay for any future claims for the risks it insures, the company said in a statement.
Last year, one rating agency downgraded State Farm Generals financial strength rating due to its capital position. With further capital deterioration as a result of the wildfires, additional downgrades could follow. If that were to happen, customers with a mortgage might not be able to use State Farm General insurance on the collateral backing for their mortgage.
Higher risks
State Farm General said customers in California will pay more for homeowners insurance in the future because the risks are greater in the state. It said immediate emergency interim approval of a rate hike is needed to more closely align cost and risk and enable the company to rebuild capital.
Over the last nine years, the lack of alignment between price and risk means that for every $1.00 collected in premium, State Farm General has spent $1.26, resulting in over $5 billion in cumulative underwriting losses, the company said.
State Farm General insured nearly 20% of California homes in 2023. That number declined in 2024 because the company announced it would not renew 72,000 homeowner policies. In June, it asked for rate hikes of between 30% and 52%.
Photo Credit: Consumer Affairs News Department Images
Posted: 2025-02-04 17:02:32