State Farm General Insurance Co. faces its largest loss in history due to last month’s Los Angeles wildfires. Already under financial strain, the company has asked the California Department of Insurance (CDI) to approve immediate property rate increases ranging from 15% to 38% to stabilize what it calls a fragile insurance market.
CDI spokesperson Gabriel Sanchez said State Farm General’s filings raise concerns about its financial health. The insurer has already paid $1bn for wildfire claims, and costs are expected to rise further.
In a Feb. 3 letter to Commissioner Ricardo Lara, the company emphasized its involvement in the California FAIR Plan, which has also received thousands of claims. If losses exceed its resources, the plan may issue an assessment to cover the shortfall. State Farm General, which primarily insures homeowners in California, stated that rising risks in the state will lead to higher costs. “We must align pricing with risk appropriately,” it said.
Sanchez confirmed that CDI will respond urgently and transparently with recommendations for Lara. The department intends to investigate the rate filings to ensure compliance with Proposition 103, which mandates that rates remain justified and appropriate. Public intervention in June had already challenged State Farm General’s previous rate requests.
Last year, the insurer sought property and casualty rate hikes between 30% and 55% for 2025 to maintain solvency. It proposed increases of 30% for homeowners, 55% for condo owners, 41.6% for tenants, 53.6% for personal liability umbrella policies, 38% for rental damage protection, and 55% for business owner policies.
By Feb. 1, State Farm General had received over 8,700 wildfire claims and warned that final costs would significantly reduce capital, even with reinsurance support from State Farm Mutual Automobile Insurance. The company explained that its high exposure to wildfire-prone areas would result in losses far exceeding its pre-event surplus.
State Farm General urged emergency action to approve interim rate hikes by May 1 for pending 2024 filings. It requested increases of 38% for rental dwellings, 22% for homeowners, and 15% for both tenant and condominium unit owners. The company noted that these interim hikes are lower than the full rate increases sought last year and emphasized the need for swift approval.
“Delays in rate adjustments could have serious consequences for our customers and the broader insurance market,” it stated. The company also argued that external reinsurance options for its high wildfire exposure are unavailable at reasonable costs. Reinsurance, it said, is essential to maintaining coverage in high-risk areas.
State Farm General pushed back against any claims that it had manipulated its financial condition. It called accusations that reinsurance costs were inflated or that financial distress was engineered “irresponsible and false.”
The insurer reported that its surplus had fallen to about one-quarter of its 2016 level by the end of 2024. Relative to its risk exposure, its surplus had declined by nearly 85%, dropping below certain regulatory minimums.
Carmen Balber, executive director of Consumer Watchdog, argued that the parent company, with a $130bn surplus, should step in rather than shifting costs onto California homeowners. The consumer group estimated that State Farm General would need to show roughly $9bn in payouts to justify a 22% rate increase. It also claimed the company has withheld financial data necessary to validate its request, despite multiple inquiries.
State Farm General, which has 2.8 mn active policies, including over 1 mn homeowners, asked CDI for urgent approval. It argued that wildfire-related losses would soon be reflected in state rating models, justifying the requested hikes.
The company also tied its request to California’s broader insurance reform efforts. It told Lara that approving the interim increases would signal the state’s commitment to stabilizing the insurance market under the Sustainable Insurance Strategy launched more than a year ago.
State Farm General reported more than $5bn in cumulative underwriting losses over the past nine years, citing inadequate rates as the cause. For every $1 in premiums collected, it said it has spent $1.26.
