in the face of climate disasters, insurers refuse to take on new customers in California

2023-06-13 18:44:06

By Julien Da Sois

Posted
34 minutes ago, Update 28 minutes ago

Firefighters battling the “Mosquito Fire”, California’s biggest wildfire of 2022. JOSH EDELSON / AFP

The proliferation of mega-fires in recent years in the state has got the better of the commitment of these companies, which now refuse to take on more risks.

California, at the forefront of mega-fires, will it soon be impossible to insure? Two of the largest insurance companies in the US state have just announced that they are stopping the underwriting of new home insurance policies, justifying this decision in particular by the multiplication of natural disasters.

It is through of a press releasepublished on May 26, that State Farm, number one in home insurance in the “Golden State“, has indicated “stop accepting new requests […] due to historic construction cost increases above inflation, rapidly growing exposure to natural disasters and a difficult reinsurance market». «It is necessary to take these steps now to improve the financial strength of the companyadded State Farm.

In the process, Allstate, another big player in the market in California, made public on June 2 a similar measure, taken on the sly in November 2022.We suspended new homeowners, condo and business insurance policies in California last year so we can continue to protect current customers“, said the company in a press release, relayed by the American press. «The cost to insure new residential customers in California is far higher than the price they would pay for property and casualty insurance policies covering wildfires, due to the very high costs to repair homes and higher reinsurance premiums. high“, she justified herself.

Read alsoClimate: will we still be able to insure our house tomorrow?

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“Towards an uninsurable future”

These decisions are being made as California is increasingly exposed to the flames. Over the past five years, the western US state has suffered an average of more than 7,000 wildfires per year, burning an average of more than 8,000 km2, according to data from the California governor’s office. Global warming is no stranger to the increase in the number and intensity of forest fires, scientists agree.

After the announcement of State Farm, the Californian authorities wanted to be reassuring. “There are approximately 115 insurance companies that continue to underwrite residential policies statewide.“, said the California Department of Insurance in a press release at the end of Maywhile regrettingads such as those from State Farm (which) can create uncertainty and anxiety among consumers looking for home insurance». «There is no non-renewal (of contracts) with this announcementfrom State Farm, the department also pointed out.

Already last year, two other American insurers, American International Group (AIG) et Chubb, had decided to cut coverage on high-end California properties due to the wildfires. Across the Atlantic, it is feared that these successive announcements will spread. “We are marching towards an uninsurable future, not just in California but across the United States“, declared Dave Jones, director of the Climate Risk Initiative at the Faculty of Law of the University of California at Berkeley, to the American media. Vox.

The phenomenon already seems to be on the rise in other states. Last week the Wall Street Journal reported that insurer AIG would limit home coverage for high-value properties across the United States, including some in New York and Florida. Still in Florida, Farmers Group has completely stopped underwriting new home insurance policies, citing the historically high costs of natural disasters and significant reconstruction costs.

To the point that climate change calls into question the insurance model, particularly in France? The risk was pointed out this Tuesday morning by Cécile Duflot, former environmental minister and now director general of the NGO Oxfam, citing the Californian example. “Insurers are now on their toes on climate change. (…) Insurers are on alert, saying: we will no longer be able to work. When insurers no longer insure, neither the country nor the economy works“, she warned on the antenna of Europe 1.