Extreme climate events in California have fuelled an exodus of insurance companies that now refuse to insure homes and businesses.
Leading insurance companies say that increasing wildfire risk and re-building costs have driven them to stop writing new policies in America’s most populous state.
Industry giants State Farm and Allstate have ceased accepting a range of new insurance polices policies in California citing a rapidly growing catastrophe exposure, inflation, and a challenging reinsurance market.
Across the USA, insurance companies are increasing rates, limiting coverage or pulling out completely from areas vulnerable to wildfires and other natural disasters caused by climate change. Insurance markets in Florida and Louisiana have been hit badly by extensive damage from hurricanes. Premiums are rising in Colorado driven by a growing threat of wildfire while Oregon is struggling to map its own wildfire insurance risk.
US scientists say climate change will continue to create more extreme weather events with wildfires more frequent and destructive. According to the Insurance Information Institute California has almost one and half million homes at risk of extreme wildfire, more than any other US state.
In Colorado, a study found that last year 76 per cent of insurance companies lowered their exposures in the state. Florida has seen insurance companies wiped out by extreme weather events and risks are rising as climate change increases the strength and intensity of hurricanes rainstorms. Louisiana, also hit by hurricanes, is struggling to maintain its insurance market after companies went bust or cancelled and refused to renew existing policies.
Many California homeowners now face extreme weather with no insurance. A state law that provides basic fire insurance coverage in high-risk areas when other insurance companies will not, last year saw policies increase to 272,846 homes in 2022. A recent new state regulation requires insurers to offer discount rates if building-owners comply with new standards including installing fire-resistance roofs and creating fire-breaks around their homes.