California E&S Insurance

State Farm Halts Home-Insurance Sales in California [WSJ Article](https://www.wsj.com/articles/state-farm-halts-home-insurance-sales-in-california-5748c771) Excerpts: > State Farm is stopping the sale of new home-insurance policies in California effective Saturday, because of wildfire risk and rapid inflation in construction costs. > For 2022, State Farm’s auto-insurance companies reported record underwriting losses, totaling $13.4 billion, due primarily to rapidly increasing claims severity. Its homeowners’ business reported an underwriting gain. State Farm is a mutual company, meaning it is owned by its policyholders, and it has deep pockets. It ended 2022 with net worth of $131.2 billion. What amazes me is the media is focusing on global warming and inflation... as that was the cause of this decision. While I think global warming is a real concern, this is just another example of government incompetence making housing less affordable for the average American. The fact is... for **years**... Newson 1) blocked insurance companies ability to drop policy in high fire risk areas (e.g. thus subsidizing a bunch of homes that should have never been built and largely for the wealthy) and 2) blocked premium increases to keep up with the true rate of inflation (This guarantees insurance companies will lose money in California and meant that other states were essentially subsidizing the cost). The end result is insurance companies are now leaving the state, there will be less options/competition, and insurance rates are bound to continue to go up. Most people don't understand how major insurance products (e.g. home, auto, etc) work. Essentially, money goes into a pool (aka float) and the insurance company acts as a bank and loans out that money temporarily. But the float eventually returns to the policy-holders. Now, there can be corruption and inefficiencies within insurance companies. For example, these companies can charge administration fees, which eat away at the float. But generally speaking, premium rates are a reflection of the true cost to provide insurance. No one is increasing rates and pocketing the difference. It is math done by actuaries. These measures, as well as all the other CA nonsense that occurred with COVID(e.g. rent moretoriums for over 2 years) will discourage development, inflate rent, and inflate the cost of home ownership. But at least California will have a bullet train going from bakersfield to Merced (population 400k and 90ks) since connecting places where people actually live (e.g. LA and SF) was too expensive. I really feel like the entire state is going the way of Illinois. Just incompetence all around.

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