Major insurance companies may pull out of all US states with high risks of storms, wildfires (2024)

FAQs

Which states are insurance companies pulling out of? ›

Insurers are retreating from markets in hurricane-prone North Carolina and western states like Oregon, Colorado, and Arizona that have struggled with increasingly frequent and destructive wildfires in recent years.

“They know the risk is just too high to be actuarially sound for their business," he said. In its announcement, State Farm said too many buildings are being destroyed by climate catastrophes, inflation is making it too expensive to rebuild, and it can't protect its investments any longer.

According to the insurance companies, due to the significant increase in both the number and cost of auto accidents, the premiums that they are collecting to pay these claims are inadequate to also allow the companies to make a profit. Insurance companies are regulated by each individual state.

Three primary factors are driving the insurance challenge. First, natural disasters are becoming more common and costly. Second, the price of reinsurance is skyrocketing. And finally, Florida's litigation-friendly environment compounds the issue by making it easy for customers to sue their insurers.

Insuring a home in Florida is getting more challenging. Nationwide has joined a list of companies that are ending some homeowner insurance policies in the state. The announcement highlights the insurance crisis Florida residents have been facing for the past 18 months. “They're just not making money in Florida.

The decision is the latest blow to California property owners, as insurance companies continue to raise rates for customers or discontinue coverage. In 2022, insurance giant AllState paused its sales of new home insurance policies in California due to wildfires and higher costs of doing business in the state.

The property insurance sector is under heavy pressure from poor financial performance due to unexpectedly high inflation, a shift of exposures to higher-risk areas, and rising reinsurance costs.

Allstate stopped issuing new insurance policies for all business and personal property in California back in 2022. Since then, companies like State Farm, Farmers Insurance and The Hartford have made similar business moves.

The Chronicle reports that insurance industry magazines linked Geico's decision to close California sales offices to its failure to raise insurance prices in compliance with Sacramento regulations and other market forces.

Why is Nationwide cancelling homeowners insurance? ›

The move is part of a nationwide decision to scale back Nationwide's Private Client business, which specifically caters to wealthy homeowners, according to a Nationwide spokesperson. Crestbrook stopped writing new policies in December, according to documents filed with the Department of Insurance.

To clarify, State Farm, Allstate Farmers USAA, Travelers, Nationwide and Chubb are still active in California, they have just either limited or stopped writing new home insurance policies. Current home insurance policies with these providers are still being honored.

Between their various companies, State Farm and Allstate occupied five of the top 10 spots on the most-sued list. Also on the list are Safeco, a defendant in 880 cases; Scottsdale Insurance Company, 855; Liberty Mutual, 831; GeoVera Speciaty Insurance Company, 687; and Lexington Insurance Company, 585.

Climate-related disasters rank as just one of the leading factors turning the insurance industry on its head.

Bankruptcy of Executive Life Insurance Company

Executive Life Insurance Company is regarded to be the biggest bankruptcy of an insurance company in the United States in the course of recent years. Based in California, the life company had to file for bankruptcy in 1991 following disastrous investments in junk bonds.

Florida and California have seen a mass exodus of insurance companies, but they are not the only states insurance companies are pulling out of. Homeowners in Massachusetts, Louisiana, Colorado, Minnesota, Arkansas, Nebraska and Oklahoma may also struggle to find a policy.

Climate change and inflation have combined to make insurance claims more frequent and more costly in disaster-prone regions. Reinsurance companies have been raising prices, leaving smaller insurance providers without the safety net they need to handle a large volume of claims after a natural disaster.

Gov. Ron DeSantis' office confirmed that State Farm Insurance plans to continue its presence in the Florida insurance marketplace after Farmers Insurance declared plans to leave the state.

This decision comes after State Farm announced in May 2023 that it would no longer be accepting new applications for home and business owners. The cycle of property insurance policy non-renewals will begin on July 3 and the commercial apartment policy non-renewals will begin on Aug.