SAN FRANCISCO — The crisis enveloping California’s home insurance market deepened further this week as two more major carriers announced plans to cease selling new policies and renewals in the state. The exits highlight how insurers are rapidly retreating from regions plagued by natural disaster risks exacerbated by climate change.
Tokio Marine America Insurance Company and its subsidiary Trans Pacific Insurance Company will stop offering homeowners and umbrella liability insurance across California starting July 1st. Over 12,500 existing policyholders will receive non-renewal notices in the coming months.
“Given escalating costs and our relatively small market share in personal lines, continuing to provide homeowners coverage is unsustainable for our companies,” a Tokio Marine Holdings spokesperson stated. The Japanese firm plans to focus solely on commercial insurance going forward.
This decision follows a wave of recent pullbacks by incumbent insurers like Allstate, State Farm, and others that have stopped writing new policies or dropped tens of thousands of California homeowners amid mounting losses from wildfires and other climate-fueled disasters. Just last month, the state’s insurance commissioner Ricardo Lara bluntly declared the situation “a real crisis.”
As major players exit, California homeowners are facing limited coverage options and skyrocketing premiums. Families may find themselves forced into higher-cost, bare-bones policies from “insurer of last resort” plans originally designed as temporary stopgaps. Some longtime residents could potentially be priced out of areas deemed too high-risk by remaining private insurers.
“We’re seeing an unraveling that could destabilize entire communities if the trend continues unabated,” warned Amy Bach of United Policyholders, a consumer advocacy group. “Homeowners unable to maintain required insurance risk foreclosure and plummeting property values. There are tremendous ripple effects.”
Bach emphasized the turmoil underscores the need for urgent climate adaptation measures to fortify vulnerable regions against future disasters. But in the near-term, she said solutions must be found to maintain a functioning insurance market.
“State officials need to get very creative, very fast in incentivizing companies to write policies again through public-private partnerships or other innovative programs,” Bach advised. “If this issue doesn’t get prioritized immediately, we’re headed for dire scenarios in cities and towns across California.”
In his statement acknowledging the escalating “crisis,” Commissioner Lara cited resilience efforts like wildfire prevention, home-hardening, and enhancing community preparedness as crucial pieces of the solution set. However, he emphasized that market availability and affordability must be addressed in parallel through regulatory reforms, consumer protection measures, and engaging with insurers.
“This is an enormously complex challenge without any easy answers,” Lara said. “But it’s an existential priority that impacts millions of Californians. We have to use every tool at our disposal.”
The widening insurance vacuum has already begun impacting the state’s housing market, according to Michael Woo, a senior fellow at UC Berkeley’s Center for Catastrophic Risk Management. He warns that as policies become harder to secure or renew, buyers may be unable to obtain mortgages, suppressing sales in higher-risk areas.
“We’re seeing early signs of this playing out, but the effect could snowball rapidly as more insurers exit,” Woo cautioned. “California’s policymakers need to get out ahead of this defining issue before it sparks a full-blown housing crisis on top of the insurance predicament.”
As the insurance availability crisis compounds, California seems fated to confront tough choices over how to build resilience, incentivize the private market, and allocate risks equitably. For millions of homeowners statewide, the path forward grows murkier by the day.
