CA's Largest Insurer Seeks 22% Emergency Rate Hike After LA Wildfires

LOS ANGELES — State Farm General Insurance Co. is asking California’s insurance commissioner to immediately approve emergency rate hikes averaging 22 percent in the wake of the devastating Palisades and Eaton fires.

The move would impact rates for customers across the Golden State.

The company Monday in a letter to state Commissioner of Insurance Ricardo Lara sought interim rate increases of 22 percent for homeowners, 15 percent for rental tenants, 15 percent for condominium owners and 38 percent for rental dwellings, effective May 1. If the final, non-interim rate is set lower than the interim, the company would issue refunds for the difference, the letter said.

As of Saturday, State Farm General had received over 8,700 claims and paid more than $1 billion to customers in connection with the Los Angeles wildfires, according to the letter, which noted the fires “will collectively be the costliest in the history of the company.”

"We know we will ultimately pay out significantly more, as these fires will collectively be the costliest in the history of the company," State Farm President/CEO Dan Krause and other company leaders wrote in a letter to California Insurance Commissioner Ricardo Lara. "Although reinsurance will assist us in paying what we owe to customers, the costs of these fires will further deplete capital from (State Farm)."

"The high concentrations of risk covered by (State Farm) in the fire footprint will generate a direct loss many times larger than the company's pre- event surplus," Krause added. "(State Farm's) already stressed financial position will be further weakened, even after accounting for billions of dollars in anticipated recoveries from a prudently robust reinsurance program that includes State Farm Mutual Automobile Insurance Company as the primary reinsurer."

The request for an emergency rate hike comes after State Farm General in May 2023 opted to stop writing new policies in California and in 2024 moved to non-renew 72,000 existing policies, although the company has paused homeowner nonrenewals in Los Angeles County in the wake of the fires, the letter said.

“To protect millions of California consumers and the integrity of our residential property insurance market, the department will respond with urgency and transparency to recommend a course of action for Commissioner Lara,” the Department of Insurance said Monday, according to the Los Angeles Times.

As of 2024, the company’s surplus was roughly a quarter of its amount in 2016, according to the letter, which said that for the nine-year period ending in 2024, State Farm General will pay $1.26 in claims and expenses for every $1 collected in premium.

A rating agency last year downgraded the company, the letter said, noting further capital deterioration could result in additional downgrades and leave customers unable to use State Farm General insurance as collateral mortgage backing.

“State Farm wants to fill its bank accounts on the backs of California homeowners, some of whose homes are in ashes,” Consumer Watchdog Executive Director Carmen Balber said Monday in a news release. “Insurance Commissioner Lara must require State Farm to prove it needs this staggering increase.”

City News Service contributed to this report.