2 more carriers stop insuring California homeowners
The number of companies willing to insure homeowners in California continues to shrink, with the recent announcement that AmGUARD Insurance, a subsidiary of Berkshire Hathaway-owned GUARD Insurance Companies, and Falls Lake Insurance will be pulling out of the market completely.
This comes on the heels of State Farm, Allstate, Farmers and other companies announcing they are altering their business models in the state.
“AmGUARD only began writing in California markets in 2019, experiencing major losses in 2020, 2021, and 2022 that were unusually high and not typical of the market as a whole,” Michael Soller, deputy insurance commissioner for the state, said. “AmGUARD represents approximately 0.6% of the homeowners’ market. Falls Lake is a very small writer with approximately 900 policies in force.”
No one from either company returned multiple calls asking for comment.
Falls Lake notified the state that it will stop issuing renewals in September, while AmGUARD will stop renewing policies starting in November.
Allstate last November announced it would not issue new policies for homeowners, condos and commercial customers. State Farm said essentially the same thing in May. Farmers is limiting its new policies in the state to 7,000 per month. AIG left California in early 2022. Chubb Ltd. started its non-renewal policy in California in 2019.
Even with these pullbacks, more than 100 companies continue to provide homeowner insurance coverage in California.
“Insurance companies are not utilities required by law to cover all residents. Insurance companies will not write insurance, especially in high-risk areas, unless they are able to cover the related claims and expenses and earn a fair return,” Soller said. “It benefits no one if an insurance company goes insolvent because it did not have enough access to capital to cover 100% of its claims.”
Companies rethinking insuring customers in California cite the escalating costs of wildfires and other natural disaster claims that continue to roil the state. Seven of the biggest fires in the state occurred in 2020 and 2021.
The North Bay is all too familiar with fire in the last several years — Valley (2015), Tubbs and Nuns (2017), Mendocino Complex (2018), Kincade (2019), Glass (2020), LNU Lightning Complex (2020).
According to the state Department of Insurance, more than 25% of homes in Napa, Lake and Mendocino counties are in high fire risk.
“California’s market is robust but not immune to wildfires, extreme heat, and coastal and inland flooding. Our focus is on implementing necessary insurance market reforms to expand consumers’ choices in California, especially in high-risk areas,” Soller said.
The state Department of Conservation on Aug. 17 announced it will award more than $72 million to communities across the state to build fire-resilient communities. One beneficiary is the North Coast Resource Partnership which is a collaboration among tribes, counties, and other stakeholders in Sonoma, Mendocino, Del Norte, Humboldt, Trinity, Siskiyou, and Modoc counties.
Besides fire, insurance companies are now contending with weather more typical of Florida, with the National Hurricane Center Aug. 18 issuing a tropical storm watch for parts of Southern California.
For those who are dropped by their carrier, the state’s FAIR Plan is an option. (FAIR stands for Fair Access to Insurance Requirements.) But even the state Department of Insurance on its website describes it as “the insurer of last resort.”
The FAIR Plan is usually more expensive than going through a private company and only covers losses from fire, lightning, internal explosion and smoke.
Traditional coverage includes theft and liability, and may also cover wind, hail, vehicles and more.
As of the start of 2022, the FAIR Plan policies made up approximately 3% of overall residential insurance policies in California.