Committee to Consider Resolution Calling for Governor to Declare Crisis in Homeowner Insurance Market

The City Council’s Legislative Policy Committee will consider recommending the City Council pass a resolution that calls for California’s Governor, Insurance Commissioner, and State Legislature to take immediate steps to stabilize the state’s property insurance market.

The resolution comes amid concerns over rising premiums, policy cancellations, and a growing scarcity of insurance options for both homeowners and businesses. The language highlights the detrimental impact on real estate transactions, housing development, and the affordability of insurance in high-risk wildfire areas.

“… In 2023, two of the State’s largest insurance carriers announced they would stop issuing new homeowners and commercial property insurance policies in California, and these carriers represented over 27 percent of the admitted insurance market in California, and several other insurance carriers, representing more than 36 percent of the market, announced plans to limit new policy origination,” the draft ordinance reads.

The resolution calls on Governor Newsom to declare a state of emergency on the matter. Originally, the language called on the governor to declare a state of emergency, but the City Council opposed that language in a split vote earlier this year and sent the matter to the committee.

The ordinance could go back to the City Council, where it requires two successful readings to pass.

Several counties have called on the governor to declare a state of emergency as “an urgent call to secure a fair, stable insurance market that keeps our communities safe and resilient in the face of an increasingly unpredictable climate future.”

State Farm has stopped writing new policies for California homeowners, and Allstate has limited its policies going forward. The Department of Insurance approved rate increases totaling 34% and 30%, respectively.

According to media reports, these actions were taken due to a number of factors, including the rising cost of rebuilding homes and the increasing frequency and severity of natural disasters, including wildfires.

Several other insurers have also announced plans to limit new policy offerings. Allstate is California’s fourth-largest insurer in the state and provides coverage for 350,000 homeowners.

In September, State Farm projected that it could drop more than 1 million California policies over the next five years due to impending financial instability.

The San Francisco Chronicle reported that June filings submitted to the California Department of Insurance found that if the insurance company continues to decline, its sector involving property insurance, comprised of homeowners’ insurance and business liability, could face a total policy count drop from 3.1 million to under 2 million in just five years.

“Wildfires have continued to be a significant and growing concern throughout the State of California, which along with other local government agencies, nonprofit organizations, and homeowners, have worked extensively to improve fire resistance and reduce wildfire risk; and Whereas, despite these efforts, many residents and businesses have reported having their property insurance policies canceled or having significantly higher premiums imposed by their carriers,” the ordinance reads.

Despite the stance, the resolution is a symbolic gesture. The City Council has no federal or state legislative powers in matters regarding the increasing insurance costs.

The ordinance could return to the City Council later this month.