When risk outruns the models, insurers stop underwriting it — and the rules have to be rewritten to bring them back.
~1 million policies
State Farm's planned California withdrawal (3.1m → ~2m by 2028); stopped writing new home policies in 2023, non-renewed ~72,000 in 2024
Forward-looking pricing, now permitted
the regulator changed the rules to allow forward-looking catastrophe models (and reinsurance costs) in pricing, to stop insurers exiting the market
+17% / $400m
the regulator approved an emergency 17% premium increase on existing policies to keep State Farm's California unit solvent, conditioned on a $400m capital infusion from the parent
The reading — and its limits
The chain is unpriceable risk → financial stress → exit. A non-stationary peril (wildfire shifting faster than the historical record) met a pricing framework that required rates be set on past data and barred forward-looking models — so the distribution moved but the rules forbade pricing it, and the insurer's most honest response was to exit. The proof comes from both directions: the insurer that walked away, and the regulator that rewrote the rules — conceding the old framework could no longer price the risk.
Method State Farm withdrawal figures and stated reasons from its own filings and California Department of Insurance filings. The pricing-framework constraint and its 2024-25 reform from the California Code of Regulations directly (10 CCR 2644.25.1 reinsurance; 2644.4.5 / 2644.5 catastrophe models) — not secondary characterisation.
Computed 1 August 2026