State Farm Halts New Home and Business Insurance in California Over Wildfire Risks

State Farm, one of the largest U.S. insurance agencies, has announced it will cease accepting new applications for home and business insurance in California due to escalating wildfire risks and rising rebuilding costs. This includes all personal and commercial property and casualty insurance lines, effective immediately. Existing policyholders are not impacted, and the company will continue to offer auto insurance in the state.

The decision follows significant challenges including historic surges in construction expenses that have outpaced inflation, increased exposure to catastrophic wildfires, and a difficult reinsurance landscape. These combined factors have prompted State Farm to prioritize maintaining financial strength amid volatile market conditions.

California's wildfire risk has intensified over recent years, driven by prolonged drought and climate factors that create dry, combustible conditions. In recent history, fires such as the 2020 Creek Fire, 2021 Dixie Fire, and 2022 Mosquito Fire have caused widespread property damage and costly rebuilding efforts, underscoring the robust exposure insurers face in the region.

Rebuilding costs following wildfire destruction have proven substantial, with examples like the 2022 Southern California Coastal Fire resulting in estimated reconstruction expenses exceeding $500 million for just 20 homes. The economic fallout from major wildfire seasons, including the catastrophic 2018 Camp Fire, has been measured in billions of dollars.

While California’s FAIR Plan offers basic fire insurance coverage for high-risk areas where standard insurance is unavailable, it provides limited protection, generally covering only fire damage and requiring additional policies to cover other perils such as theft and liability.

State Farm acknowledges the need to collaborate with state regulators and policymakers to enhance market capacity but maintains that its current approach reflects a prudent response to escalating risks. The company's continued evaluation of market dynamics indicates potential adjustments in the future.