Postcard from California: The climate crisis has become a home insurance crisis

By Bill Walker

It’s an ominous sign of how the climate crisis is hitting ever closer to home: Because of the heightened risk of catastrophic wildfires, the two leading U.S. homeowners insurance companies no longer offer new policies in California.

Last month, State Farm, which insures 1 in 5 California homes, announced it would immediately stop selling new home and business property and casualty policies to avoid “rapidly growing catastrophe exposure.” Days later, Allstate, the fourth-largest insurer in the state, confirmed it had quietly stopped writing new California policies last year, because wildfires had driven the cost of insuring and rebuilding homes “far higher” than it could recoup from customers.

Current State Farm and Allstate policyholders are still covered ­– at least for now. State data show that since 2017, insurers have cancelled or declined to renew almost 1 million homeowner policies, most in areas at high risk of wildfire. Some companies that specialize in insurance for high-end, multimillion-dollar homes have pulled out of the California market altogether.

Californians have always lived with the ever-present threat of wildfire, but the eight worst wildfires in the state’s history have all burned in the last five years. In that period, wildfires have burned more than 11 million acres in California, destroying or damaging more than 50,000 homes and other buildings. Insurance industry researchers say that in 2017 and 2018, two of the worst fire years, combined insured property losses totaled $33 billion.

The risk is only going to get worse.