Property insurers have reduced their exposure in California in recent years, citing rising wildfire risk, higher construction costs and pressure from reinsurance markets, according to company statements, state data and industry reporting.
The California Department of Insurance says it has released annual ZIP code-level and county-level data on new, renewed and non-renewed homeowners and dwelling-fire policies, providing a basis for analyzing changes in coverage availability in wildfire-prone areas.
Several major carriers, including State Farm and Allstate, have announced limits on new homeowner policies or changes to their California portfolios. State Farm said it stopped issuing new policies due to “rapidly growing catastrophe exposure” and a “challenging reinsurance market,” while Allstate cited the rising cost of insuring homes in the state.
The costs for reinsurance — coverage insurers purchase to protect against large-scale losses — have also increased in catastrophe-exposed regions as disaster-related claims and insured losses have risen in recent years, according to the Swiss Re Institute.
Properties in high-risk wildfire zones are more likely to face higher insurance premiums or reduced coverage availability due to elevated risk of catastrophic loss, according to the California Department of Insurance.
Homes located near undeveloped land and in wind-prone regions face elevated exposure to wildfire spread, based on risk modeling and hazard assessments from HazardHub. Wildfire hazard maps are also designed to reflect long-term fire behavior risk based on terrain, vegetation and weather patterns, according to California fire officials.
California’s Fire Hazard Severity Zone maps classify areas based on long-term fire risk factors including terrain, vegetation and weather patterns.
A Southern California property cited in a Wall Street Journal report examining rising insurance costs illustrates the type of risk insurers are evaluating. The Agoura Hills home sits within a Very High Fire Hazard Severity Zone and inside the burn perimeter of the 2018 Woolsey Fire, according to state mapping data, reported Sacramento Business Daily. The property’s estimated rebuild cost is approximately $3.2 million, with annual premiums reported at about $44,000 — roughly 1.4% of the replacement value.
California’s insurance market operates under a prior-approval system established by Proposition 103, which requires insurers to obtain regulatory approval before implementing rate increases.
The California Department of Insurance has said it is working with insurers and policymakers to address availability and affordability challenges, including efforts to incorporate forward-looking catastrophe modeling and expand coverage options in high-risk areas.
