U.S. primary insurer Allstate will be open to business in nearly every part of California once new regulations are enacted that enable the firm to factor in the output of forward-looking catastrophe models and its reinsurance costs, reports Bloomberg.
Last month, we discussed new regulation announced by the state’s Insurance Commissioner, Ricardo Lara, designed to allow for an expanded use of catastrophe models to help insurers operate there more sustainably.
Currently, the Department of Insurance allows the use of cat models for earthquake losses and fire following earthquake, but under the proposed regulation, this would be expanded to include wildfire, terrorism, and flood lines for homeowners and commercial insurance lines.
In recent years, many insurer have pulled back from California as a result of increasingly severe wildfires and subsequent losses, as well as regulations that cap the cost of policies.
According to Insurance Commissioner Lara, the proposed reforms represent the biggest changes to California’s insurance market since the late 1980s, and while still in draft form, is expected to be complete by the end of 2024.
Once the reforms are enacted, which will also make it easier for insurers to increase rates as carriers are free to propose rates at any level needed to cover future losses, Allstate will end its hiatus on underwriting in the State of California, reports Bloomberg.
In a public hearing earlier this week, Gerald Zimmerman, senior vice president of government relations for Allstate, said: “If the regulations were in effect today, we would begin selling new homeowner insurance policies tomorrow. Let me repeat that: As soon as we can use catastrophe modeling and incorporate the net cost of reinsurance into our rates, we will be open to business in nearly every part of California.”
Zimmerman went on to say that Allstate will offer insurance coverage “in nearly every corner” of the state once the reforms are enacted.
It’s notable as this is the first large insurer to publicly state its intentions to return to the state once the new regulations are in place, which could prompt others to make similar announcements.
In a statement to Bloomberg News, Allstate confirmed its intention to grow its market share in California, but stressed that rates need to properly reflect the cost of providing coverage for the risk before it re-enters the region.
Allstate announced in November 2022 that it would “pause new homeowners, condo and commercial insurance policies in California to protect current customers.”
