State Farm reports staggering insurance losses from Los Angeles wildfires

By Megan Fan Munce
Feb 25, 2025
https://www.sfchronicle.com/california-wildfires/article/state-farm-insurance-la-losses-20187472.php

This Pacific Palisades neighborhood in Los Angeles, seen Feb. 3, was almost entirely destroyed by fire. State Farm, California’s largest insurer, is reporting billions of dollars in losses from the Palisades and Eaton fires. Brontë Wittpenn/The Chronicle

State Farm General, California’s largest home insurer by far, estimates it will pay $7.6 billion to survivors of the Los Angeles wildfires.

The staggering figure is the highest loss estimate of any insurer so far, which makes sense due to the size of the company and its exposure: A Chronicle analysis of policy data found that State Farm insured more households in and around the fire perimeters than any other company. It’s already paid $1.75 billion to policyholders, according to a Tuesday letter sent to California Insurance Commissioner Ricardo Lara.

Almost all of State Farm General’s losses will be paid by its reinsurer — the insurer of an insurance company. Unlike most insurers, State Farm General gets most of its reinsurance from its national parent company, State Farm Mutual Automobile Insurance Co.

State Farm’s estimated costs total $7.9 billion, with the $7.6 billion in direct payments to policyholders and $300 million in administrative expenses for processing those claims. Taking into account its reinsurance and an additional payment to the California FAIR Plan, the company said it expects to lose $400 million in surplus, leaving it with just over $600 million available in surplus. Surplus is a key measure of an insurer’s financial strength and ability to pay claims.

The FAIR Plan — the insurer with the second-highest number of policies in the area, according to the Chronicle’s analysis — estimates its total exposure for the Palisades and Eaton fires to be $4.7 billion. Its actual losses are likely to be much lower. Farmers Insurance Group, the second-largest home insurer in the state and third-largest insurer in fire footprint, has said it anticipates paying just $600 million, including reinsurance but excluding FAIR Plan losses.

Travelers Cos., California’s ninth-largest home insurer, said it expects to pay about $1.7 billion in total due to the wildfires, including its share of FAIR Plan losses. Executives from Allstate, California’s seventh largest insurer, said at an earnings call they expect to pay about $1.1 billion after reinsurance, including Allstate’s share of FAIR Plan losses.

Insurers as a whole, including the FAIR Plan, have paid $6.9 billion in wildfire claims as of Feb. 5, according to the Department of Insurance. Several projections have estimated that insured losses could reach $30 billion or more, making the Los Angeles wildfires the costliest natural disaster in state history. In 2017 and 2018, California’s previous record for most expensive wildfire years, insurers paid about $12 billion each year to cover damage from the destructive Tubbs, Camp and other fires.

Insurance Commissioner Ricardo Lara hosts a press conference following a meeting with State Farm at the CA Department of Insurance in Oakland on Wednesday.
Yalonda M. James/The Chronicle

In its Tuesday letter, State Farm executives once again pressured California regulators to allow an emergency rate hike to prevent its finances from further deteriorating. The company has asked Lara to approve rate hikes of 22% for homeowners, 15% for condo owners and 38% for rental dwellings to go into effect in May, bypassing the typical review process. The company said it has enough money to cover losses from the Los Angeles wildfires, but is concerned about its ability to weather future catastrophes.

The company said it would issue refunds if regulators later determined the rate hike was unjustified. But consumer groups quickly opposed the request, saying the insurer should be required to provide evidence of its need for higher prices before such a price hike is approved.

Lara has denied the request for emergency approval but was set to meet with State Farm representatives on Wednesday to review State Farm’s financial situation and whether the insurer can provide proof of its need for heightened prices.

Reach Megan Fan Munce: megan.munce@sfchronicle.com