California exodus of home insurance companies continues

Two more insurers are pulling out of California’s troubled homeowners insurance market, straining a marketplace that already has seen the pullback of several other companies that have cited increase costs related to wildfire risks.

Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. submitted filings to the California Department of Insurance stating they will not renew 12,556 homeowners policies with a premium value of $11.3 million starting July 1. Also not being renewed are 1,624 dwelling fire and liability policies with a premium value of $1.7 million typically sold to owners of rental properties, as well as personal umbrella coverage.

The companies, subsidiaries of Tokyo-based Tokio Marine Holdings, are completely exiting the homeowners marketplace. Several major insurers, meanwhile, including State Farm, Farmers and Allstate, have limited their exposure in California by cutting back on the number of new policies they issue or tightening underwriting standards. State Farm, for example, announced in March it would not renew 72,000 policies.

In deciding to pull out of the so-called personal lines market, Tokio Marine cited as its reason that its “technology supporting the personal lines business is at the end of its useful life. Due to the small size of our personal lines book and the undue financial burden of the cost to update necessary automation, we are unable to continue supporting our personal lines operation,” the company said in filings with the Department of Insurance.

Department spokesman Michael Soller said the the decision would have a limited impact on the market due to the small number of policies.

Tokio Marine Holdings, a unit of Japanese conglomerate Mitsubishi, did not respond to an emailed request for comment.

California’s homeowners insurance crisis has been building for years as climate change and extreme weather have contributed to catastrophic fires that destroyed thousands of homes. There is now an effort in Sacramento to fix the problem through a series of reforms that have put the insurance industry and consumer advocates at odds.

Insurance Commissioner Ricardo Lara is seeking to make the market more attractive for insurers by allowing them to include the costs for reinsurance and future wildfires in their premiums. Consumer advocates worry the methodology for estimating the costs of future fires will not be adequately transparent and burden homeowners with excessive premiums. They also oppose passing on reinsurance costs to homeowners.