The news was first reported by The San Francisco Chronicle.
Allstate’s decision in California follows a pattern seen across the United States in which insurance companies are raising rates, restricting coverage or ending business altogether in areas vulnerable to climate change and natural disasters. In Florida, most large insurance companies have pulled out of the state, with homeowners relying on smaller private companies, whose resources are being stretched, to protect their homes in the face of severe storms that have become typical.
In the statement, Allstate cited other factors in pausing new policies in California, including state regulations and inflation, which has led to higher costs for rebuilding.
It’s not the first time Allstate limited the sale of new homeowner insurance policies in California. It did so in 1994, after the Northridge earthquake. The company eventually returned to the state, but it paused new homeowner insurance policies there again in 2007. Ten years later, it came back to the California market.
The combined moves by Allstate and State Farm in California may lead more property owners in the state to lean on the FAIR Plan, a state-offered “insurer of last resort” in high-risk fire areas. As of 2022, there were more than 270,000 FAIR policies — more than double what was offered in 2018 — as worsening wildfires and an exodus of traditional insurers from fire-threatened areas led some homeowners to rely on the program, which provides temporary, and generally more expensive, fire coverage.