Firefighters attempt to extinguish a fire in a home along the Pacific Coast Highway in the Pacific Palisades neighborhood on Jan. 8, 2025. A wildfire broke out in Los Angeles County on Jan. 7, which has destroyed more than 1,000 homes, businesses and other structures, Los Angeles County Fire Chief Anthony Marrone said at a briefing Wednesday.
Los Angeles, California – California Insurance Commissioner Ricardo Lara approved an emergency 17% rate hike for State Farm on Tuesday, deepening the financial strain for more than 1 million policyholders as the state’s insurance market reels from the effects of climate change and a series of catastrophic wildfires.
The decision follows a ruling earlier in the day by administrative law judge Karl Frederic Seligman, who found that State Farm—the largest homeowner insurer in California—was in “extraordinary financial distress.” According to Seligman, the company’s surplus dropped from $2.24 billion in 2022 to just $620 million after January’s wildfires devastated neighborhoods across Los Angeles County. The judge concluded that another major disaster could nearly eliminate the company’s remaining reserves.
“This is not a game,” said Commissioner Lara in a statement. “We are in a statewide insurance crisis, affecting millions of Californians. Taking this on requires tough decisions.”
The emergency rate hikes, which go into effect June 1, include a 17% increase for homeowners, 15% for renters and condos, and a steep 38% for rental properties. State Farm originally requested these hikes in early February, citing urgent financial need following the wildfires, which the company estimates will generate $7 billion in claims.
State Farm holds 20.7% of the state’s homeowners insurance market. The company reported that it has already paid out more than $3.5 billion on over 12,600 wildfire-related claims. However, many wildfire survivors say they are still waiting for full payouts, prompting Lara to demand that the insurer provide a detailed recovery plan and participate in a full public rate hearing.
State Farm acknowledged the commissioner’s approval as “a step in the right direction,” but warned that the decision does not resolve the broader uncertainty in California’s insurance market. “It is difficult to match price to risk in California,” the company stated. “We need immediate rate increases to help stabilize State Farm General’s financial condition to serve our California customers for the long term.”
The crisis has forced many homeowners to turn to California’s FAIR Plan—the state’s insurer of last resort—which offers more limited coverage than private insurers. With extreme weather events growing more frequent and severe, insurers argue they cannot continue operating under the state’s strict rate control regulations unless allowed to better account for risk.
Commissioner Lara said he remains focused on holding insurers accountable. “I am balancing all the facts,” he said. “Protecting all State Farm customers and the integrity of our insurance market is an urgent matter.”
