Cali insurance, tariffs, good read,

" Before the devastating fires of 2025, California’s fire insurance market was already in a state of crisis, shaped by a combination of regulatory constraints, insurer withdrawals, and mounting wildfire risk.

Insurers were prohibited from using forward-looking catastrophe models to set rates for wildfire risk. Instead, they were required by law to base their rates on historical average losses over the previous 20 years. This approach became increasingly problematic as wildfires grew more frequent and severe, making historical data a poor predictor of future risk. Regulations also prevented insurers from raising premiums to reflect increased reinsurance costs, further limiting their ability to price policies according to actual risk.

Major insurers began withdrawing from the California market or ceasing to write new policies in fire-prone areas. Chubb stopped writing new policies for high-value homes in 2021, Allstate followed in 2022, and State Farm, the state’s largest home insurer, stopped writing new policies in 2023. In 2024, State Farm announced non-renewals for over 70,000 policies statewide, including thousands in high-risk areas like Pacific Palisades and Altadena, just months before the 2025 fires. Other insurers, including Tokio Marine America and its subsidiaries, also exited the market in 2024.

Homeowners who managed to keep their policies often faced dramatic premium hikes. For example, some saw their annual premiums rise from $4,500 to $18,000. As a result, many property owners either lost coverage or could not afford to insure their properties, leading to widespread underinsurance. By the time of the 2025 fires, fewer than a quarter of affected properties were insured against fire."

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