Because they refuse to understand how the world works. The California crisis in homeowners insurance has only one real solution | Fortune
The people in charge in California have arranged things so that insurance companies are on the hook for properties that they do not insure.
Another unpleasant surprise lurks in the shadows for insurers—assessments from the Fair Access to Insurance Requirement (FAIR) plan, the state’s insurer of last resort.
When the FAIR plan’s capital is unable to cover losses (as is almost certain to be the case in 2025), the FAIR plan will make an assessment on regulated insurance carriers in California in line with their market share.
For example, the FAIR plan is likely to incur $4 billion of gross losses from the January fires. California regulators have already approved a $1 billion assessment against insurers to keep the FAIR plan solvent. Therefore, State Farm—which has approximately 20% share in California—already has a $200 million bill—for policies that it didn’t underwrite and aren’t on its books. And more assessments could be coming if loss estimates get worse.
No insurance company can do business under those circumstances, and so they are all heading for the exits. The only way to not be on the hook for FAIR assessments is to have 0% exposure to California.
Of course California refuses to understand that.
Before reading the linked article, I right away thought of John Garamandi, the first elected insurance commissioner.
ReplyDeleteSo it was only mild surprise to see that the linked article did mention him. (The surprise that an article would be so honest.). My real surprise is that it has taken this long.
Read up on Garamendi's CV for insight on why.
Further, look who put him there as Ins Commish. A strong argument can be made that 1988 was Year One which lead to this current debacle.
Just glanced at his tenure as Insurance Commissioner. I guess that shouldn't surprise me.
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