In a dramatic move, State Farm, the largest property and casualty insurer in California, has decided to halt issuing home, business, and casualty insurance policies in the state, blaming escalating wildfire risks and rocketing construction costs for this crucial decision, and really, who can blame them as wildfires throughout the region continue to become more destructive and expensive, those costs have been going up so much recently that insuring the homes and properties that might be at risk for being enveloped by the surrounding blaze is quickly becoming unsustainable for insurers like State Farm.

Now, some may argue that insurance companies like State Farm are purely focused on short-term financial goals while the long-term goal of the Department of Insurance is protecting consumers, as Michael Soller, spokesperson for the California Department of Insurance, mentions in one of his emails obtained by the San Francisco Chronicle, but the fact of the matter is that factors like climate change, reinsurance costs affecting the entire insurance industry, and global inflation are well beyond the control of these entities as State Farm adds that historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market are not letting them cope up with the problem at hand.

The citizens of California are no stranger to the damages that wildfires can bring, and as a result, the potential insurance costs have been creeping up, but you can’t really stop people from rebuilding their lives in these areas, can you?, but now that companies like State Farm are backing out, the real victims are those who reside in these wildfire-prone zones, while some residents like Michael were fortunate enough to be covered, others weren't so lucky in securing insurance or it became too expensive for them, for example, the California homeowner's association was denied insurance outright or given a quote for more than double the premiums they were paying earlier.

Well, it's not just State Farm that has done this, as just last year, another home insurer named the American International Group pulled out of California as well, according to a Wall Street Journal report, now if you don’t see this as a trend then you should know that American International Group had at the time focused primarily on high-end homes, whereas State Farm has a much larger footprint in the California insurance market, and quite unmistakably, one can notice a clear pattern here, a pattern of big insurance groups backing off from this high-stakes game of insuring properties in wildfire infested areas, which does appear somewhat concerning.

But when we look at it from the perspective of an insurance company, considering the fact that the absolutely unprecedented Dixie Fire caused destruction to more than 1,000 homes and even the Creek Fire, which was recorded to be the largest single fire in California history, managed to damage or destroy nearly 1,000 structures in the process as reported by ABC News, so companies have to balance the risks they assume with the losses they pay out and counterbalance their capacity to fulfill the claims of their policyholders, and that’s exactly what a company like State Farm appears to be doing, fulfilling their responsibility to manage that risk, though not everybody is going to agree with their perspective.