California's homeowners insurance market is once again in crisis. FOX KTVU reported on April 8, 2024, that State Farm, the state's largest insurer, plans to drop tens of thousands of homeowner and rental dwelling policies later this year — a sweeping move driven by wildfire risk and market instability.
The announcement follows months of industry turmoil, with American National and other carriers also leaving the state. For many Californians, especially those in the Bay Area's wildfire-prone regions, this latest development underscores just how fragile the insurance system has become.
According to KTVU's report, State Farm will begin sending non-renewal notices to tens of thousands of policyholders across California, primarily in Contra Costa, Sonoma, Santa Clara, and Santa Cruz counties.
"It's definitely unusual," said insurance expert Karl Susman, speaking with KTVU's Alex Savidge. "It's certainly unusual to see the volume of non-renewal that we're seeing from a carrier like State Farm."
The affected areas are concentrated in high-risk wildfire zones, including communities such as Oakland, Orinda, and Santa Rosa — places where brush exposure and steep terrain make homes particularly vulnerable to fire damage.
"You're going to see that the non-renewals cluster in those high brush exposure zones," Susman explained. "If a carrier is trying to reduce their overall exposure, they'll target the areas most likely to be affected by wildfire."
While homeowners are understandably frustrated, Susman emphasized that the root of the problem lies in unprecedented risk frequency and outdated regulatory constraints.
"Carriers are having 100-year events happening every four, five, six years," he said. "They're grappling with how to properly spread that risk out."
California's unique geography and climate have always made insurance a challenge, but the scale and intensity of wildfires in the last decade have made many areas virtually uninsurable under existing models.
Compounding the problem, state regulations under Proposition 103 limit insurers from using forward-looking catastrophe modeling — the same kind of predictive data tools used nationwide to anticipate losses. Instead, they must rely on historical data, even though past losses no longer reflect today's rapidly changing climate risks.
"They're trying to stay solvent," Susman noted. "They have to make sure they have enough money to pay claims, so they're reducing exposure in the highest-risk areas."
Although California has drawn the most headlines, Susman pointed out that this is part of a national trend.
"It's not isolated to California," he told KTVU. "There are companies in every state that are now having capacity issues — meaning they've got too much exposure in areas that are seeing higher claims."
That growing strain on insurers' balance sheets has led to sweeping adjustments across the country. In Florida and Louisiana, hurricanes have caused similar insurer withdrawals. In Colorado and Texas, hail and wildfire have driven record losses.
California's crisis, however, is the most visible — because of both the scale of its risk and the rigidity of its regulations.
