Insurers dropped fire coverage for California homes months ago. Now, wildfires are claiming more houses in Los Angeles.

• Some homes affected by the Los Angeles wildfires might not have insurance.
• Insurers have been canceling plans and declining to sign new ones in the state.
• Years of worsening wildfires have increased payouts and other costs for insurers in California.

As wildfires destroy homes in Los Angeles, some homeowners might face rebuilding without insurance payouts.

That's because some insurance companies have been cutting back on their business in California in recent years as wildfires in the state have worsened.

State Farm, for instance, said in 2023 that it would no longer accept new homeowners' insurance applications in California. Then, last year, the company said it would end coverage for 72,000 homes and apartments in the state. Both announcements cited risks from catastrophes as one of the reasons for the decisions.

Homes in the upscale Pacific Palisades neighborhood, one of the areas hardest hit by the fires so far, were among those affected when State Farm canceled the policies last year, the Los Angeles Times reported in April. State Farm did not immediately respond to a request for comment from Business Insider.

Other home insurers have dropped coverage in the state, even in areas where the wildfire risk is low, NBC Bay Area reported in September.

"When insurance companies face higher losses or payouts, they typically respond in two ways: raise premium prices and stop renewing policies or writing new policies," Dave Jones, the director of the Center for Law, Energy & the Environment at the University of California, Berkeley's School of Law said in a September Q&A posted to the university's website. "California insurers are doing both."

Between 2011 and 2018, Jones was also California's insurance commissioner.

A new rule, set to take effect about a month into 2025, will require home insurers to offer coverage in areas at high risk of fire, the Associated Press reported in December. Ricardo Lara, California's insurance commissioner, announced the rule just days before the Los Angeles fires broke out.

At a press conference on Wednesday, one reporter asked Lindsey Horvath, a member of the Los Angeles County Board of Supervisors, whether the Los Angeles fires would affect insurance companies' operations in California.

"I believe it already has, and the conversation is ongoing," Horvath said.