State Farm axes new California home insurance policies citing 'escalating risk' of climate change: report
Florida homeowners have been facing considerable difficulty from an insurance standpoint. In early April, Tampa-based National Public Radio (NPR) affiliate WUSF-FM reported that homeowners in that state will see their property insurance rates increase by 40 percent in 2023 — despite the fact that they are already paying almost three times the national average.
But Florida is not the only state where climate change is making insurance a headache for homeowners. Axios reports that in California, State Farm will no longer accept new applications for homeowner's insurance, effective Saturday, May 27.
State Farm cited "rapidly growing catastrophe exposure" and "historic increases in construction costs outpacing inflation" as among the main reasons for its decision. The company, however, said it will continue to honor existing homeowner's insurance policies in California.
Axios' Rebecca Falconer, in a report published on May 29, explains, "Multiple studies show climate change is influencing the frequency and severity of extreme weather events, increasing the risk of wildfires and also, the proportion of storms that reach major hurricane status of Category 3 or above. With more severe and frequent severe weather events and extreme weather swings, the resilience of homeowners and communities is on the line. And how lenders, insurance companies and others incorporate escalating risks is a key issue, per Axios' Andrew Freedman."
Falconer notes that before State Farm "ceased operations" in California, it was "the top home insurance firm in the state." The reporter adds that in 2022, another insurer, the American International Group, pulled out of California.
Climate change is affecting California and Florida in different ways. Humid Florida is facing more hurricanes and rising sea levels — whereas California, with its dry, arid climate and low humidity, is looking at more droughts.
Climate change deniers often point out that Florida has always been prone to hurricanes just as California has always suffered droughts and wildfires and Kansas and Oklahoma have always been battered by tornados. But climate change, according to scientists, is making extreme weather events more severe and more common.
Falconer observes, "Some insurers pulled out of Louisiana and Florida last year after forecasters warned of 'another active Atlantic hurricane season,' per Bloomberg. Florida is facing an insurance crisis ahead of the official start of the hurricane season on June 1…. Some companies (in Florida) have gone insolvent, and rates have skyrocketed."
Axios' entire report is available at this link.
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