Insurance Loss Leaves Thousands of California Homeowners Vulnerable

American National Group would no longer provide state coverage, affecting thousands of California homeowners.

American National, acquired by Brookfield Asset Management Reinsurance Partners for $5.1 billion two years ago, is the latest insurance company to depart the state due to rising home repair expenses, wildfires, and increased HOA fees.

Due to revenue losses, the insurance agency is also abandoning eight other states, and all policies will expire this fall. Policyholders could expect to receive non-renewal notices as early as August.

As of December, American National covered approximately 36,475 homeowner policies in California; nevertheless, these homeowners may soon need to locate a new insurance company.

“This action is driven by significant and persistent profitability issues in the homeowner’s insurance market,” said an American National spokeswoman to Insurance Business Magazine.

The business also stated that “inflationary pressures driving up costs, increasing claims frequency, and competitive market conditions” contributed to the coverage being removed in California and eight other states.

These states included Arkansas, Colorado, Louisiana, Minnesota, Oklahoma, South Carolina, South Dakota, and Washington.

“We’re a very small-scale participant in the homeowners’ markets in these states,” Scott Campbell, American National senior vice president, chief client experience and corporate communications officer, admitted.

“This decision is driven by a number of factors, including several years of increased frequency and severity of weather events, which have resulted in a greater lack of profitability in this line of business. Inflationary pressures have also raised the cost of claims payments, exacerbating the lack of profitability.

In California, State Farm, Allstate, and Farmers Insurance have all halted or revised their homeowner plans. Previously, the three businesses covered 40% of all California homeowners insurance.

Insurance companies are fleeing California, which has already seen 137 wildfires in 2024, burning homes and acres of land.

“The season’s outlook calls for vigilant monitoring and preparedness, as these varied weather patterns may lead to differing fire risks across regions,” the California Department of Forestry and Fire Protection stated on its website.

While American National is departing other states other than California, the specific circumstances in that state are increasingly making consumers nervous, particularly as their options for home insurance diminish and premiums rise.

“Insurance costs should raise an alarm for homebuyers,” Joe Cronin, head of International Citizens Insurance, stated.”The insurance market in California is notoriously complex due to the high risk of blazes and a state statute that demands additional processes for rate increases exceeding 7 percent, such as board consent and examination by the insurance deputy commissioner.”

Insurance companies are progressively leaving California in search of higher profits, according to William Lemmon, the managing property/casualty broker and standing agency principal of Los Angeles-based Broadway Insurance Services.

“It all comes down to an attempt to maintain their profitability,” Lemmon went on to say.”In combination with recent severe storms and wildfires, an increased cost of labor and materials due to inflation, and rates based on 2020-2021, carriers simply can’t sustain to offer terms in the state as they once could.”

According to Alan Chang, the founder and CEO of Vested Title & Escrow, the insurance impact could significantly delay or prohibit prospective homebuyers from becoming homeowners.

“Prospective buyers trying to enter the market now are already facing higher home values on top of higher interest rates,” he said. “This is a perfect storm against home affordability.”

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