(The Center Square) – As the nation’s largest home insurers continue to pull out of California due to wildfire risks from the state’s poor forest management, the state’s sixth-largest insurer decided to raise its rates 15.3% rather than leave.
“The consecutive years of wildfire losses and increasing number of acres burned across the state have challenged our view of risk and require us to implement adjustments to allow us to be viable in the market,” Travelers Insurance said in a filing. Travelers also said it would not be renewing “ineligible” homeowner and landlord policies.
As insurers either leave entirely or stop offering coverage for some property owners, many Californians have no insurer left other than the FAIR Plan, California’s state-created insurer of last resort. However, this plan is nearly insolvent because its authorized rate increases aren’t allowed to cover the cost of reinsurance — that is, coverage FAIR purchases if its insurance premiums aren’t enough to cover a major catastrophe in excess of the plan’s $200 million cash reserve and $2.5 billion in reinsurance. Any further costs could result in each plan beneficiary paying $1,000 or more in assessments for each major fire that strikes the state. FAIR currently costs approximately $3,200 per year and only covers a limited amount of property value.
Global ratings agencies say high property insurance costs is driving workers out of the state and could have damage the state’s credit rating.
Major rain in the past two years is creating fuel for future fires once the state enters another dry cycle. California Governor Gavin Newsom’s proposed budget for the 2024-2025 fiscal year includes $3.7 billion for fighting wildfires, but just over $300 million for forest and resource management that can prevent wildfires, suggesting limiting future fires is not a state priority.
