California blames ‘climate change’ for major insurer’s decision to stop covering new homes

State Farm will no longer take new homeowner insurance applications in California, a move the state government is blaming on climate change.

The insurance company cited the high cost of construction in the state and the growing threat of catastrophes including wildfires in its Friday announcement. The California Department of Insurance (CDI) told Axios climate change was driving the issue, making it beyond the state’s control.

“The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation,” CDI spokesperson Michael Soller told the outlet. “We have been here before after major wildfires. What’s different is the actions that we are taking with the first-ever insurance discount program for wildfire safety and unprecedented wildfire mitigation investments from the Legislature and Governor.”

The cost of building multifamily homes in California rose 25% per square foot from 2010 to 2020 after adjusting for inflation, according to the Terner Center for Housing Innovation, and wildfires continue to pose a major risk to homes in the state. State Farm’s announcement recognized California’s efforts to mitigate fires and pledged to work with the state’s insurance department to make it possible to provide coverage again.

“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the company’s statement read. “It’s necessary to take these actions now to improve the company’s financial strength.”

Wildfires have destroyed about 25,000 California homes and other buildings in the last five years and severely damaged thousands more, according to The Washington Post. The California Department of Insurance Assessment predicts a 77% increase in annual burnt acreage by 2100.

Experts have blamed California’s wildfire problem on its lack of controlled burns. California conducts far fewer prescribed burns than Florida, which is half the size; by August 2021 Florida had conducted 1.6 million acres of controlled burns compared to California’s 35,000 that year, according to NPR.

State Farm did not respond to the Daily Caller News Foundation’s request for comment.

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