Major Insurer Exit Deepens California Home Insurance crisis
SACRAMENTO, CA – California homeowners face increasing difficulty securing and affording home insurance as more companies retreat from the state due to wildfire risk. The latest development comes wiht the announced departure of tokio Marine’s subsidiaries, shifting their focus to commercial insurance, and Crestbrook Insurance, a Nationwide affiliate specializing in high-value homes, beginning to non-renew policies in June, offering customers a transition to surplus lines carriers.
The escalating situation underscores a growing trend impacting the California housing market. Recent data from Realtor.com reveals that climate-related threats, especially wildfires, now endanger 5.6% of U.S.homes, representing $3.2 trillion in property value. A meaningful portion – nearly 40% - of this risk, or $1.8 trillion in property, is concentrated in California.
California law mandates insurance companies provide homeowners with 75 days’ notice before policy cancellation. Though, a complete insurer exit typically unfolds over approximately one year as existing policies reach their renewal dates. A state of emergency declaration by the governor offers temporary relief, preventing insurers from dropping coverage for affected customers for up to two years.
The rising cost and limited availability of home insurance are already disrupting California’s mortgage market. Damon Germanides,co-founder and broker at Insignia Mortgage,explained to Mortgage Professional America that unexpectedly high insurance quotes are increasingly jeopardizing loan approvals.
“We get on it early on in the loan process because we don’t want the client to have sticker shock when they get their insurance quote, or it could jeopardize the loan because the traditional underwriting matrix for insurance doesn’t work anymore,” Germanides said. “In [certain] areas, they’re five times higher, sometimes, than what you’d expect.”
The situation highlights the challenges facing California homeowners and the broader real estate market as climate change continues to drive up insurance costs and limit coverage options.
