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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]It’s not just a Florida issue:
https://www.sfchronicle.com/california-wildfires/article/insurance-state-farm-18125433.php[/quote]

Insurance risk hasn’t really changed much in the past year in Florida or California. Insurance companies always say they are reducing their insurance exposure because of lawsuits or construction costs or some other nonsense they blame on the states but I worked on this issue as a Congressional staffer and they dropped more policies after the 2008 financial crisis than they did after Katrina. 
The profits of an insurance company come more from its investments than from its insurance underwriting. Insurance is a mechanism to create a huge float of reserves that they seek to invest in high-return investment schemes, which often are boom and bust markets like commercial real estate, mortgage backed securities, etc. 
When their investments are earning high returns they are willing to expand their insurance business in riskier areas to collect much more premiums to invest. When their investments are losing money they cut their insurance exposure to reduce the amount of capital they are required to hold for paying claims. 
[/quote]

I'm going to agree that this is likely due to State Farm getting caught wrong-way on interest rate risk. They probably have a ton of agency securities with 2-3% coupons that had their fair values wrecked by the increase in rates.

Vast majority of California homes have no exposure to wildfire risk. The only people exposed are rich folks up in the grassland hills or rural areas where 2nd homes are concentrated. Vast majority of people live in concrete sprawl of LA, San Diego, or the Bay Area with pretty much no wildfire risk at all. State Farm could easily tailor its availability and charge the appropriate premia to any homes adjacent to woodlands or grasslands that are fire prone. No one living in Riverside, Long Beach, Santa Monica, or Daly City is at risk of a wildfire. And those four cities right there probably cover 350,000 dwelling structures.

State Farm ain't telling the whole story. [/quote]

Reinsurance rates matter more than anything else and those are still going up. Unless those rates stabilize, nothing else really matters. [/quote]

Reinsurance rates matter in states where most policies are written by small, geographically restricted insurance companies.  This is not the typical state insurance market.[/quote]

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