🔥California wildfires threaten to scorch state’s insurance sector, spread losses nationwide

The wildfires ravaging Greater Los Angeles are turning into one of the worst disasters in US history, causing up to $150 billion in damage.

Stuck in the middle are California’s insurance companies, some of whom managed to flee before the disaster began, while others, including the state-backed FAIR Plan, face payouts that could bankrupt them.

▫️ Major insurers such as Allstate, AIG, and Chubb have already either stopped issuing new policies or quit California altogether in the last five years.

▫️ Nationwide announced plans to withdraw by June 2025, and State Farm, the largest home insurer in the state, has been cancelling policies since 2024, with over 72,000 left unrenewed to date.

▫️ Between 2020 and 2022, 2.8 million California homeowners lost coverage, including over 530,000+ in Los Angeles County.

▫️ California’s state-backed FAIR Plan stepped in where private companies backed out, but costs more (about $3,200 per year and climbing) and provides lower coverage. The program now faces $24 bln in losses.

▫️ The loss of the California market is likely to impact insurers' bottom lines and raise premiums, making them unaffordable for remaining clients. The fallout could also spread nationally as insurers raise rates elsewhere to cover losses.

▫️ Wildfires are just one of the natural disasters making wide swathes of the US uninsurable. Millions on the East Coast face declining coverage and rising premiums due to hurricanes and flooding.

▫️ In 2023 alone, the US experienced 28 major climate disasters, causing over $93 billion in damage.

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