California Sees Two More Property Insurers Withdraw From Market

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California’s already strained property insurance market is facing a new challenge as two more insurers, Tokio Marine America 热点黑料 Co. and Trans Pacific 热点黑料 Co., plan to withdraw from the wildfire-prone state entirely starting in July.

The two companies, units of Japan-based Tokio Marine Holdings Inc., disclosed their plans in filings submitted to the California Department of 热点黑料. They said the decision will affect 12,556 policies with premiums of $11.3 million.

The companies didn’t cite a reason for pulling out of the market, but major insurers across California are ending or reducing coverage as the state grapples with risks posed by wildfires and other natural disasters fueled by climate change.

The disclosure of the exit comes just a few weeks after State Farm General 热点黑料 Co. said it will be cutting about 72,000 policies in July, just nine months after announcing it would stop offering new coverage. Several other companies have either paused new policies or will no longer offer new ones, including Allstate Corp., The Hartford, Farmers 热点黑料 and United Services Automobile Association.

To stabilize the market and coax insurers back to California, 热点黑料 Commissioner Ricardo Lara last year announced a new regulatory overhaul to allow insurers to factor future climate risks and reinsurance costs into their pricing. In turn, insurers will be required to offer more coverage in fire-prone areas. Many of the details have yet to be released, and the earliest the plan could go into effect is December.

Tokio Marine America and Trans Pacific didn’t immediately respond to requests for comment.

This comes as California’s property insurer of last resort told lawmakers that it’s financially unprepared to cover the costs of a major catastrophe in the state. The plan now faces $311 billion in potential losses, up from $50 billion six years ago, California FAIR Plan president Victoria Roach said in a state legislative hearing.

The Hartford in January said it will discontinue writing new homeowners policies in California.

Liberty Mutual in July 2023 said it will stop offering its business owner’s policy (BOP) product in wildfire-prone state California. That same month Farmers said it will limit new homeowners insurance policies in California.

Eight of the state’s top 20 wildfires have occurred in the last half-dozen years, burning 8,512 structures, according to . Those losses do not reflect the destruction from the Camp Fire in 2018, the state’s most destructive and deadliest fire, which destroyed 18,804 structures and cost over $16.5 billion.

A report from Gallagher Re last year shows the threat of damaging wildfires in conjunction with inflation and pricing challenges has led to a distressed insurance and reinsurance market, particularly in California.

Top photo: Homes in Santa Clarita, California.