California homeowners face another insurance company pullout 

California homeowners could soon find themselves shopping for insurance on the open market after State Farm, one of the largest insurers in the state, said it will not renew the policies of more than 72,000 properties because of rising costs and "catastrophe exposure."

When will the change take effect? Starting in July 2024, State Farm will stop insuring more than 30,000 residential homes in California, and starting in August, will discontinue coverage on 42,000 commercial apartment properties. This follows the company's decision announced last May to stop issuing new homeowner policies in the state, due in large part to the increasing number and severity of wildfires.

The move happened at a time when insurance companies are rethinking where they want to do business. Allstate also announced last year that it would not issue new policies in California, and companies like AAA and Farmers have pulled back from insuring properties in Florida because of increased incidences of flooding. Some insurers have also started raising their premiums in wildfire-prone states like Colorado.

What did State Farm have to say? "This decision was not made lightly and only after careful analysis of State Farm General's financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations," the company said in a Mar. 20 statement.

California Department of Insurance (CDI) Deputy Commissioner Michael Soller told Real Estate News that State Farm's actions raised "serious questions" about the company's financial well-being. Soller added that the agency is working with State Farm's home state of Illinois to get a better idea of the company's plan for improvement.

"We need to be confident in State Farm's strategy moving forward to live up to its obligations to its California customers," Soller said.

Could more insurers leave the state? California's state insurance agency also said on March 26 that it plans to hold a public meeting to discuss new regulations to make it easier for homeowners insurance companies to do business in the state. That could include streamlining rate reviews and enhancing public participation in the rate-making process.

"This will help our department's experts make sure that no policyholder is paying more than is required," CDI Commissioner Ricardo Lara told NBC Bay Area.

California's efforts to keep insurance companies active in the state are happening as the National Association of Insurance Commissioners, an umbrella organization that represents state regulators, is working to address the affordability and availability of insurance policies nationwide.

Altogether, NAIC said on March 8 that it is collecting data from more than 400 property insurers to "give state insurance regulators a clear sense of what is happening in their individual property markets and the nation overall."