California E&S Insurance

Insurance relies on the law of large numbers. Lots of people insured for their various levels of risk to absorb claims from people who experience a loss. The premiums are invested to hopefully, increase the amount they have to pay claims. Around 50 years ago, a single hurricane came through Florida and was so big it wiped out some insurers. Insurers started to set up subsidiaries to isolate certain states’ risk. If one state had huge number of claims, it wouldn’t take down the whole company, only the subsidiary. Each state has their own risks and rates are set at the state level. Some states are more strict than others when it comes to rates (how much is charged). I think all states require filing of rates, but not all require approval before using new rates. Add to this external factors more severe and regular weather events, home price increases over the last decade, construction cost increases due to COVID and tariffs, labor cost increases because of immigration enforcement, lawsuit costs. and you have a perfect storm for insurance rate increases. I avoid stock insurers because they must look out for the shareholders. This is more of an explain it like you’re 15, rather than 5.

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