Allstate Insurance has announced that it will pay out $1.1 billion in claims caused by the Southern California wildfires that occurred in January. The company’s decision comes as many insurers, including Allstate, have been canceling homeowners’ policies in California due to the growing threat of wildfires.
The company’s liability is a small fraction of the total insurance claims from the California fires, which are expected to cost the industry between $35 billion and $45 billion. This amount includes claims from 16,600 properties. Allstate’s payout is also dwarfed by the overall growth in its profit for the fourth quarter, which saw an increase of 34% to $2.1 billion.
The news comes as California homeowners are likely to face rate hikes in their homeowners insurance premiums due to the fire. State Farm, the state’s largest insurer, has requested an emergency interim rate hike averaging 22% and has received over 8,700 claims and paid out over $1 billion so far. Insurers can now use costs associated with the fires as justification for rate increase requests.
Additionally, insurers will be able to factor in the cost of the California FAIR plan assessment when seeking rate increases across the state. They will also be able to use the cost of reinsurance as part of their rate calculations, a change that does not apply to previous rate calculations.
Source: https://edition.cnn.com/2025/02/06/business/allstate-california-fire-losses/index.html