State’s largest home insurer, which has paid customers over $1bn, claims fires put firm under increased financial strain. State Farm General, California’s largest home insurer, is seeking an emergency rate increase for homeowners following the Los Angeles wildfires last month. If approved, the hike would average a 22% increase for policyholders. The insurance giant claims that the fires have put the company under increased financial strain. The company has already received at least 8,700 claims and paid more than $1bn to customers and expects to pay out “significantly more”, according to a press release.

“Insurance will cost more for customers in California going forward because the risk is greater in California,” the statement reads. “That is foundational to how insurance works. Higher risks should pay more for insurance than lower risks.”. The recent wildfires have been one of the most expensive natural disasters the insurance has faced in its history. They go on to warn that further “capital deterioration” as a result of the wildfires could harm their ability to pay out insurance across the board, including customers with a mortgage possibly losing the ability to “use State Farm General insurance on the collateral backing for their mortgage”.

The statement says that “immediate emergency interim approval of additional rate is essential to more closely align cost and risk and enable State Farm General to rebuild capital”. Consumer Watchdog, a LA-based advocacy group, disputed that State Farm General was in financial trouble. They claim that the insurers made underwriting profits of $1.4bin between 2020 and 2023, and that parent company State Farm Mutual had “$134 billion in the bank”.

“Filling State Farm’s bank accounts shouldn’t fall on the backs of California homeowners recovering from disaster,” the group told the Los Angeles Times. State Farm currently insures about 1 million homeowners in the state of California, and also has an additional 2.8m other policies active across the state. In June of last year, the company sought a 30% rate hike for homeowners polices, as well as a 36% increase for condo owners and a 52% increase for renters. The sudden increase raised questions about the insurer’s financial stability.

State Farm chose not to renew fire insurance for 1,626 State Farm customers in the Palisades neighborhood in 2024, according to California’s insurance office. They represented about 70% of State Farm’s market share in Pacific Palisades, according to the San Francisco Chronicle. Finding fire insurance for homes in areas with high fire risk is a challenge that will only increase for Californians, experts predict. Michael Coffey, an insurance defense litigator who works on large, global insurance cases, says he expects more insurance companies to leave the state – forcing prices up for everyone.

The company notes that they’ve made the decision in recent years to “limit overexposure” in high-risk areas. The company previously stopped writing any new policies in California in May 2023, with the exception of personal auto insurance policies. Last month, State Farm announced that it had canceled a planned commercial scheduled to run during the 2025 Super Bowl, citing the LA wildfires as their main priority.