State Farm Seeks 22% Property Insurance Rate Hike Amid Los Angeles Wildfire Losses

State Farm, California’s largest property insurer, has formally requested a 22% rate hike from state regulators after suffering unprecedented losses from recent wildfires in Los Angeles, the Washington Post reports.

In a letter sent Monday to California’s insurance commissioner, the company described the fires as “the costliest in the history of the company,” warning that its financial stability is at risk without immediate relief.

The fires, including the devastating Palisades and Eaton blazes, have prompted more than 8,700 insurance claims from policyholders, with payouts already exceeding $1 billion. State Farm officials noted that they anticipate significantly higher losses as claims continue to be filed and processed.

“Previous years’ natural disaster losses had already weakened the company’s finances, resulting in a credit rating downgrade,” the letter stated.

Without additional capital, the insurer warned of the potential for further credit downgrades, which could jeopardize coverage for more than 2.8 million Californians.

The company characterized the situation as dire, urging regulators to grant an emergency interim rate increase to stabilize the insurance market and protect policyholders.

The request highlights growing concerns about the financial viability of insuring properties in fire-prone areas of California. Analysts estimate that the economic impact of the Palisades and Eaton fires could range from $50 billion to as high as $250 billion.

State Farm emphasized that rising wildfire risks will inevitably lead to higher insurance costs for California homeowners.

“Insurance will cost more for customers in California going forward because the risk is greater in California,” the company wrote in its request.

State regulations require approval for rate increases exceeding 7%, but as wildfires become more frequent and severe, insurers have increasingly clashed with regulators over the ability to adjust premiums to match the growing risks.

The strain on California’s insurance market has already led State Farm and other major insurers to reduce their presence in the state. In March, State Farm dropped 30,000 homeowner policies, including nearly 70% in the Palisades area. Homeowners unable to secure private insurance have turned to the state-backed “insurer of last resort,” known as the Fair Plan.

The Fair Plan has received more than 3,200 claims related to the Palisades Fire and over 1,200 from the Eaton Fire. If the plan’s liabilities exceed its ability to pay, it may impose surcharges on member insurance companies, potentially increasing costs for homeowners across the state.

The wildfires have devastated Los Angeles communities, burning through more than 23,700 acres in the Palisades area and over 14,000 acres in the Eaton region. At least 27 people have died, and thousands of structures have been destroyed. Crews have made progress in containment after more than a week of battling the blazes.

The cause of the fires is still under investigation, with officials exploring the possibility that the Palisades Fire was sparked by the reignition of a previous blaze.