As in a number of other disaster-stricken states, policyholders in California are facing alarming declines in their pool of available insurance carriers.
Victoria Roach, president of the California FAIR Plan, confirmed yesterday that the state’s fire insurer of last resort is now one of the largest residential insurers in the state, although the insurer aims to sell as many policies as possible to private carriers.
But in what could be good news for the state: Two years after stopping issuing new homeowners policies in California, Allstate has said it is considering a return to the market. The company’s re-entry is contingent on the California Department of Insurance’s approval to include catastrophe models in its rate increase proposals.
The insurer paused offering new policies in 2022 due to increased wildfire risk, rising home reconstruction costs and rising reinsurance prices, but maintained renewals for existing customers.
Allstate expressed in a statement: “Once home insurance rates fully reflect the costs of protecting consumers, we will be able to offer home insurance to more Californians through timely rate approvals, leveraging our advanced wildfire modeling, and use the reinsurance costs.” “
Even though the FAIR plan calls for higher fares, there are a number of disincentives for airlines in the Golden State;
On the hook for disaster.
If a major disaster hits California and FAIR does not have enough money to cover claims, it can order insurers operating in the state to share in the losses suffered. “In the event that we have a disaster,” Ms. Roach told a Little Hoover Commission hearing yesterday, “and if the claims come through, we don’t have the capital to fund those claims, we will evaluate the market “. Based on the market share we are two years behind, we will send an invoice to each insurance company to provide money for the FAIR plan to cover our losses and our operating costs.”
“Even if they don’t make money selling policies, they’re still responsible for the shortfall that you can’t pay out – is that right?” Commissioner Anthony Cannella asked: “It just seems like a house of cards.”
Regulatory interference
Regulators around the world love to regulate, and some would say no state does this more than California. While regulators may be belatedly trying to allow a little more flexibility in the market, it appears regulators can’t help themselves when news breaks that the Health Care Affordability Board has approved a 3% cap on health insurance premiums in the U.S. state – “We want to be aggressive,” said CEO Dr. Mark Ghaly earlier this week. The healthcare industry has argued that the cap cannot be met. More than half of California’s 425 hospitals are loss-makers.
While Allstate has not provided a timeline for when it might begin issuing new policies again, the Insurance Department expects to implement new regulations by the end of the year. This could be the first part of the process of making California a viable insurance option.
If the regulations were in effect today, we would begin selling new home insurance tomorrow,” said Gerald Zimmerman, senior vice president of government relations at Allstate, in an April 23 public hearing. “Let me repeat: As soon as we can utilize catastrophe models and incorporate the net cost of reinsurance into our rates, we will be open for business in almost all parts of California.”
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2024-04-26 15:29:02
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