State Farm Faces More Than $600M in Losses From LA Wildfires

State Farm General faces $612 million in losses from the wildfires that burned through thousands of homes in Los Angeles County last month.

The state’s largest insurer, a unit of Illinois-based State Farm Mutual Automobile Insurance, estimated it will cost $7.6 billion to settle its wildfire claims, the Los Angeles Times reported.

But reinsurance will lower its losses to $612 million, it said.

The company disclosed it has already paid $1.75 billion to cover about 9,500 claims.

State Farm General said it will handle all of its fire-related expenses because the majority of losses will be absorbed by its parent company, which also provides it with reinsurance.

That reinsurance will lower the losses State Farm General must absorb to $212 million, according to the Times.

But the company also expects to be assessed around $400 million to help bail out the California Fair Plan, an insurer of last resort backed by licensed state carriers, now facing $4 billion in fire-related losses.

The announcement comes after State Insurance Commissioner Ricardo Lara turned down a request by State Farm General to raise home insurance rates by an average of 22 percent to help pay for the Los Angeles wildfires.

This month, Lara denied the increase, saying the company failed to prove it was warranted.

S&P Global announced Tuesday that it had put State Farm General’s AA financial rating on a negative watch, citing its “weak underwriting performance over the past five years” and “potential earnings pressure in 2025, largely from the recent California wildfires.”

State Farm General said S&P’s ratings watch “reinforces the need for urgency” in getting its emergency rate increase.

The company has said it needs the premium revenue as it awaits a decision on a proposed rate hike it filed in June, when the company asked for a 30 percent rate increase for its homeowner policies as well as 36 percent for condo owners and 52 percent for renters.

Woodland Hills-based Farmers Insurance, the state’s No. 2 home insurer, said last week that it expects to lose at least $600 million from the Los Angeles-area fires, though that doesn’t include any FAIR Plan assessment.

Mercury Insurance, also based in Los Angeles, said its gross losses could total as much as $2 billion.

But it could net under $200 million after reinsurance and possible recoveries from Southern California Edison, if the utility is found liable for having sparked the Eaton fire that burned down half of Altadena.

— Dana Bartholomew