(Bloomberg) – California Insurance Director Ricardo Lara said he plans to approve a 22% increase in emergency rates for state farm policyholders, awaiting a public hearing next month, a move aimed at stabilizing the state’s insurance markets following the devastating wildfires in the Los Angeles area.
The interim approved rate hike will provide financial relief to the California subsidiary of the state farm, which said it needs confidence in solvency regulators and rating agencies. Insurers have paid more than $2 billion in claims following the Palisades and Eaton fires in January.
Lara said the rate of resolving the state’s years-long insurance crisis has increased, exacerbating wildfires that have caused major insurers to withdraw or limit California coverage.
The commissioner said that if the insurer can justify the need to prove the need to be justified in a public hearing before an administrative law judge, he intends to approve the company’s requirement to increase the 22% increase in homeowner policy. If approved, the new rate will take effect on June 1.
“The role of the insurance specialist involves balancing a stable and sustainable insurance market that provides effective oversight for consumers,” Laura said in a statement. “To ensure long-term choices for Californians, I have to make unprecedented decisions in the short term.”
The California Insurance Agency also advised the state farm’s California subsidiary to seek $500 million in cash injection from its parent company to “restore financial stability” while calling on the company to stop non-renewal policies, the statement said.
The state farm’s demand has been skeptical of the consumer watchdog, an advocacy group that is challenging the insurer’s demand for a rate hike. The group said the parent company has a wealth of reserves and a strong credit rating that can promote California State General Insurance’s California unit.
An analysis by the University of California, Los Angeles estimated that the Palisades and Eaton fires caused at least 29 people and destroyed more than 16,000 buildings, causing $45 billion in insurance losses. State Farms has the largest property and casualty insurance market in California and is expected to account for $7.6 billion of these claims.
– Assistance with John Gittelsohn.
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