By Ramishah Maruf | CNN
New York — Farmers Insurance has implemented a restriction on new homeowners insurance policies in California, in line with other major national insurance providers.
Farmers, the second-largest provider of homeowners insurance in the state, announced that it will cap the number of policies offered in California starting from July 3. The decision was made due to the high costs and increased risks of wildfires.
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“With the escalating inflation, extreme weather events, and rising reconstruction costs, our primary focus is on serving our customers while efficiently managing our business,” stated Farmers Insurance. The company further stated that it will restrict new policies to a level that aligns with the expected monthly volume before recent market changes.
Securing homeowners insurance in states most vulnerable to climate change is becoming increasingly challenging.
Farmers’ decision follows similar actions taken by State Farm and Allstate, two of the largest insurers in the United States. Both companies announced that they will cease writing new homeowners policies in the state, citing the risk of wildfires and the limitations on insurance premiums imposed in states like California. Insurance providers also attribute the escalating costs of labor and construction to the high expenses associated with replacing homes.
“The cost of insuring new homeowners in California surpasses the premiums they would pay due to factors like wildfires, higher home repair costs, and increased reinsurance premiums,” explained Allstate in a statement clarifying its decision to halt writing new policies last autumn.
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An analysis conducted by the UN Environment Programme indicates that rising temperatures could elevate the risk of extreme wildfires globally in the coming years.
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