California approves State Farm's request for double-digit insurance rate hike
The state of California approved State Farm's request for a double-digit increase in home insurance premiums to help the insurer deal with financial challenges following the wildfires that devastated communities near Los Angeles in January.
California Insurance Commissioner Ricardo Lara on Tuesday adopted a proposed court order that will allow State Farm to move ahead with a 17% interim homeowners insurance rate increase in the state. That's less than the insurer's initial request of a 21.8% premium hike.
Under the terms of the order, which will take effect on June 1, State Farm's California-based subsidiary will receive a $400 million infusion from its parent company to ensure its solvency, and will participate in a full rate hearing at a later date. The insurer is also barred from implementing block non-renewal programs through the end of this year.
"I am balancing all the facts. Protecting all State Farm customers and the integrity of our insurance market is an urgent matter," Lara said.
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"Let me be clear: We are in a statewide insurance crisis, affecting millions of Californians. Taking this on requires tough decisions. This is not a game. This is not a media-driven moment for some to exploit — this impacts people I am committed to protecting," he added.
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State Farm General (SFG) said in a statement that the commissioner's interim rate approval is a "critical first step" for the company's ability to continue serving customers in California, adding that it "still must continue building sufficient capital for the future."
State Farm Executive Fired Over Comments On Premium Hikes After California Wildfires
"With this interim rate approval, SFG will obtain from its parent company, State Farm Mutual (SFM), an advance of $400 million under a surplus note to be issued by SFG, subject to regulatory approval. SFG would be obligated to repay the surplus note balance plus interest over time, subject to certain conditions, because customers outside California should not be expected to pay for risks in California," the company said.
It added that it's pausing group non-renewals for the rest of 2025 for non-tenant homeowners, renters and condominium unit owners, as well as rental dwelling properties.
State Farm Requests Emergency Rate Hike That Could Raise Californians' Premiums By 38%
"We remain focused on helping our customers recover from the wildfires. As of May 12, we have already paid more than $3.51 billion and are handling more than 12,692 claims," State Farm added.
S&P Global Ratings downgraded State Farm General's credit rating from "AA" to "A+" due to what it called a "significant deterioration of its capital position and regulatory solvency ratios." The rating change doesn't affect other State Farm group affiliates.Original article source: California approves State Farm's request for double-digit insurance rate hike
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