California is facing a deepening home insurance crisis, with major insurers pulling back or leaving the state entirely — leaving hundreds of thousands of homeowners scrambling for coverage and driving many toward costly last-resort options.
According to Merlin Law Group, several of the country's biggest insurance companies have dramatically scaled back their California operations in recent years. Allstate stopped writing new policies in the state in 2022. Tokio Marine America Insurance Co. and its subsidiary Trans Pacific Insurance Co. exited in 2024. Chubb and its subsidiaries halted new policies for high-value California homes with high wildfire risk as far back as 2021.
State Farm General, California's largest home insurer, announced in early 2024 that it would not renew more than 30,000 homeowner and condominium policies across the state — including more than 1,600 in Pacific Palisades and more than 2,000 in other Los Angeles ZIP codes. That decision came before the devastating January 2025 wildfires, which made a bad situation far worse.
Together, the January fires killed 29 people, destroyed more than 12,000 structures, and caused an estimated $31 billion in property damage.
Analysts and researchers say the crisis didn't happen overnight. A May 2025 report by the Independent Institute traces the root cause to California's strict regulatory framework, particularly Proposition 103, passed by voters in 1988. That law requires insurance companies to get state approval before changing rates — a process that can take months and run to thousands of pages of documentation. It also caps insurer profits at the risk-free rate plus 6%, which critics say is too low to allow companies to build adequate financial reserves.
The report notes that California ranks worst in the nation for regulatory rate suppression for both home and auto insurance. Despite being one of the most disaster-prone states in the country, the average California homeowner paid just $1,250 per year for home insurance — well below the national average of $1,915. Insurers argue those artificially low rates made it impossible to stay financially solvent.