The California Department of Insurance is downplaying the decision by two more property insurers to bow out of the state’s insurance market, saying that the companies’ market share is minimal.
Tokio Marine America Insurance Co. and Trans Pacific Insurance Co. have filed notices with the department that they would stop offering homeowners insurance and other services in California. The companies, which are both owned by a Japanese company, Tokio Marine Holdings Inc., currently have 12,556 policies with premiums totaling $11.3 million.
“In its formal notice to our department, Tokio Marine cited internal technology issues as its reason for exiting personal lines and further identified that due to the small size of their personal lines books, the cost to update the necessary automation would be an undue financial burden,” Madison Voss, senior deputy press deputy for the department, said in an email to the Southern California Record. “Trans Pacific has no personal lines written premium in California.”
The filings by the two companies come amid rising property insurance concerns in California. Last month, State Farm said it would not renew 72,000 home insurance policies in the state – 30,000 for homes and 42,000 policies covering commercial apartments – citing issues such as inflation, exposure to catastrophic weather events such as wildfires and outdated regulations.
“Neither company cited any current issues in the marketplace as the reason for exiting the personal lines market,” Voss said. “Given the companies’ minimal market share, we do not expect this to have a major effect on the California market. Consumers who are non-renewed and are having difficulty finding new coverage should contact our department so we can assist them.”
On its website, Tokio Marine cited technology issues as one factor affecting the company’s decision.
“After careful consideration, Tokio Marine America has determined that personal lines insurance can no longer be offered to its clients due to the market outlook and the impact technological and other costs are having on its ability to serve the market at the very highest standards,” the company reported.
Property insurance non-renewals for Tokio Marine will become effective on July 1 of this year or later. Non-renewal notices will be sent to policyholders no later than 80 days before the policies’ expiration dates, according to the company.
The company will also start non-renewing auto insurance policies by mid-2025, Tokio Marine America announced.
The Federal Home Loan Mortgage Corp. reported last month that while California’s insurance rates remain relatively low compared to other states, strict regulations make it more difficult for insurers operating in the state to pass along costs to policyholders.
Critics point out that when insurers exit the California market, the California FAIR Plan must take on more policies. The FAIR Plan is the insurer of last resort that was created by the state Legislature but is overseen by insurers and not taxpayers.
California Rep. Adam Schiff earlier this year introduced federal legislation that would create a nationwide catastrophic reinsurance program designed to protect consumers from costs associated with major climate-caused catastrophes. The bill is designed to protect consumers in vulnerable insurance markets such as California’s, according to Schiff’s office.