State Farm left California primarily due to financial pressures linked to increasing wildfire risks, rising inflation, and the cost of rebuilding homes after disasters. The company also faced challenges from the state's insurance regulations, which restrict how much insurers can raise rates to cover their growing costs. These factors led State Farm to stop accepting new insurance applications and eventually cancel or not renew tens of thousands of existing policies in California to reduce their catastrophe exposure and manage financial risk. The insurer cited the rapidly growing catastrophe exposure, difficulty passing on reinsurance costs to customers, and outdated insurance regulations as key reasons for scaling back in California. State Farm has also experienced multi-billion dollar net losses in recent years related to these issues. This contributed to a broader insurance crisis in California, where several insurers have limited coverage or exited the market due to wildfire and regulatory challenges.
