Two More Property Insurers Exit California Market

In a recent development, California’s property insurance market is facing a new challenge as two major insurers, Tokio Marine America Insurance Co. and Trans Pacific Insurance Co., have announced their plans to completely withdraw from the wildfire-prone state starting in July. The decision will impact 12,556 policies with premiums totaling $11.3 million.

While the companies did not specify a reason for their exit, the move follows a trend of insurers reducing coverage in California due to the increasing risks posed by wildfires and other natural disasters exacerbated by climate change. This announcement comes on the heels of State Farm General Insurance Co. revealing its decision to cut approximately 72,000 policies in July, after previously halting new coverage offerings. Other insurers such as Allstate Corp., The Hartford, Farmers Insurance, and United Services Automobile Association have also taken similar actions.

To address the instability in the market and encourage insurers to continue operating in California, Insurance Commissioner Ricardo Lara introduced a regulatory overhaul last year. The new regulations will allow insurers to factor in future climate risks and reinsurance costs when setting pricing, with requirements to offer more coverage in fire-prone areas. While the specifics of the plan have not been fully disclosed, it is expected to take effect no earlier than December.

Despite the news of their withdrawal, Tokio Marine America and Trans Pacific have not provided further comments on their decision at this time. The ongoing shifts in the insurance market within California highlight the continued challenges faced by insurers in dealing with the growing risks associated with natural disasters in the state.