State of the California Market 2021

By Theresa Gala, West Region Private Client Manager

State of the California Market 2021

The disconnect seems obvious. You have lived in California for years and not experienced any claims on your home, yet home insurance premium has jumped this year., You have been loss free and loyal customers, but your insurance carrier is non -renewing your home insurance policy.

To connect the dots and understand how you and your insurance company got to this point, consider the following trends affecting their industry :

  • From 1964 to 1990 less than $100 million per year was paid out for wildfire damage related claims.

  • From 1990 to 2010 wildfire-related claims increased to $600 million paid per year

  • From 2011 to 2018 wild fire damage related claims jumped to $4 billion per year.

  • From 2019 to 2020 the average amount paid jumped to $20 billion, as widespread fires ravaged California, Oregon and Washington.

  • Already in the first quarter of 2021, the insurance industry has paid $20 billion in claims for just the Texas Polar Vortex event.

Rising labor and materials costs are also fueling home insurance premiums that are increasing in some cases up to 100%,

Insurance companies are not making enough profit from their investment income to offset these losses, while reinsurers have become reluctant to offer coverage in areas considered as high brush zones or with heavy concentration in one specific area.

With this drastic increase in claims costs over the years the insurance industry has re-calibrated its approach , leading to the current market conditions. Two large high net worth markets currently have moratoriums on writing any new business in California. This leaves insurance brokers with fewer admitted insurers available to California homeowners.

In a number of California areas placing coverage has become extremely difficult, including Napa, Sonoma, Truckee, Woodside, Portola Valley, Carmel Valley, Los Altos Hills, Montecito, Bear Valley, Santa Barbara, and Los Angeles Hills. If you are looking to purchase a home in these areas, call your broker to see if there are issues in offering coverage.

In mid- March one large carrier gave their agents in California a non renewing list of client policies starting July 1, 2021 and this will continue in until 2022. Driving this decision is insurers’ collective $160 Billion total coverage limit in the State of California and the statistics noted above. They need to reduce their exposure in the state of California. Most clients being non-renewed are in the aforementioned areas, but some properties being non renewed are in metropolitan areas like San Francisco where a high concentration of insureds could be affected by fire following an earthquake.

There are ways to make your risk more attractive to insurers by hardening your home to reduce the potential for a wildfire claim , including:

  • Install ember resistant vents – many homes are destroyed by embers getting into the vents, causing the home to ignite.

  • Plant non-combustible vegetation around your home. No Italian cypress, but yes to succulent plants. Remove any mulch surrounding your home.

  • Maintain at least 200 of feet of clear defensible space around your home.

  • If building in a high brush area, make sure that the home is constructed with non-combustible materials.

Finally, please know that your team here at Risk Strategies is working diligently on your behalf to ensure that you are paired with the right insurer for your needs. In some cases, it takes some time to find markets willing to offer solutions. We do ask that when you are closing escrow on a property, please reach out to your client manager immediately to allow for mapping out your location and to find a viable market available to insure your property.

If you have any questions or issues as they pertain to your insurance needs, please let me know because we are committed to being a resource for you during this unprecedented time in this market place.

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