Home insurance is becoming a hotter market, as climate change makes some homes all but uninsurable.

Last week, State Farm, the largest insurance firm in the United States, announced that they would no longer be accepting new applications for homeowner insurance in California. Not just in high-risk wildfire areas, or for homes built on slide-prone parts of Big Sur, but anywhere in the entire state.

“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” reads their statement.

There are approximately 7.3 million homeowners in California, the country’s most populous state. The past few years, between 700 and 3600 houses have been lost to wildfires, fires made more likely, worse, and harder to control by California’s changing, more arid climate.

State Farm is the largest home insurance company to cut their fire losses, but not the first. Last year, two large Californian insurance firms ended their coverage of homes over a certain value in wildfire-prone areas. “We cannot charge an adequate price for the risk,” one insurance company CEO explained in an earnings call. But this is on a far larger scope.

Mortgages require homebuyers to purchase home insurance. Many city codes require it. If it’s not easily available, buying property is impossible for most and selling it becomes very difficult. Housing prices will be driven down, but in a cash-only housing market, only the wealthy will still be able to buy. California already has the lowest proportion of owner-occupied homes in the country – this will likely make the matter worse.

It’s plain that insurance companies are basing their decisions on the assumption that extreme weather will get worse and more expensive, and quickly. This should be a loud wake-up call to anyone paying attention, in a way that is harder to ignore than melting ice caps.

Photo: Shutterstock