State Farm Seeks Emergency 22% Rate Hike After $1 Billion in Wildfire Payouts

State Farm is pushing for an emergency 22% rate increase in California, citing massive financial losses from the Los Angeles wildfires in January.

On Monday, the insurance company asked the California Department of Insurance (CDI) to approve the increase for homeowners, saying it urgently needs to rebuild its capital after processing thousands of wildfire-related claims.

According to State Farm, as of February 1, it has already received more than 8,700 claims and paid out over $1 billion—a number it expects to grow significantly. The company says the financial strain is putting its operations at risk.

“Last year, one rating agency downgraded State Farm General’s financial strength rating due to its capital position,” the company said in a statement. “With further capital deterioration as a result of the wildfires, additional downgrades could follow. If that were to happen, customers with a mortgage might not be able to use State Farm General insurance on the collateral backing for their mortgage.”

State Farm argues that without an interim rate increase, its ability to provide coverage in California could be further jeopardized. The company previously stopped writing new policies in the state in May 2023 due to rising costs and risks from wildfires and climate-related disasters.

Meanwhile, the California Department of Insurance is reviewing the request but has raised concerns about State Farm’s financial condition. Officials say they will thoroughly investigate the rate application before making a decision.