Market withdrawal from catastrophe-exposed areas
A decision by one or more major insurers to stop writing new policies in an area judged too catastrophe-exposed, pushing insureds toward the insurer of last resort or the E&S market.
May 2023: State Farm stops writing any new homeowners business in California, citing wildfire risk and the cost of its reinsurance. A market withdrawal happens when one or more major insurers stop writing new policies in an area, or even decline certain renewals, because they judge its catastrophe risk incompatible with any rate the local regulator will accept. Typically that regulator caps allowed premium increases. In May 2023, State Farm, the largest US homeowners insurer, pointed to growing wildfire exposure and rapidly rising construction and reinsurance costs; Allstate had already paused new underwriting in the state in 2022 for similar reasons. Affected homeowners then turn to the state's insurer of last resort, California's FAIR Plan, whose premiums are higher and coverage more limited, or to the excess & surplus lines market. The tension is structural: physical climate risk keeps rising, while price regulators slow the rate adjustment the private market needs to keep absorbing it.
In May 2023, State Farm announces it will stop writing any new homeowners policies in California, citing wildfire risk and rising reinsurance costs; affected homeowners turn to the state's FAIR Plan or the E&S market.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.