Insurer's departure follows similar moves by major insurers such as State Farm and Allstate
QBE Insurance Corp. will leave the US home insurance market, which means almost 38,000 California policyholders will lose coverage over the next year. The company stopped offering new homeowners’ policies in California last month, saying the move is part of a plan to narrow its business focus. As of April, QBE insured 37,774 homes in the state, according to a filing with California regulators.
Many QBE customers may be able to keep their coverage if a deal goes through with Builders Reciprocal Insurance Exchange, a Texas insurer waiting for approval to operate in California. QBE said it will start sending nonrenewal notices once Builders is cleared to write policies. While QBE made up just 0.36% of California’s home insurance market in 2024, its exit is part of a larger trend of insurers leaving the state and making it harder for homeowners to find coverage.
Insurers cite mounting wildfire risks, inflation, and regulation
QBE’s exit comes after other big insurers like State Farm and Allstate pulled back or stopped taking new business in California. They pointed to wildfire risks, higher repair costs from inflation, and strict rules on pricing.
Earlier this year, two Tokio Marine subsidiaries said they would leave the market and focus on commercial insurance. Crestbrook Insurance, part of Nationwide and known for covering high-value homes, also began leaving in June, giving customers the option to move to a surplus lines carrier.
Data from Realtor.com revealed that wildfires, though more localized, endanger 5.6% of homes worth $3.2 trillion. Nearly 40% of this risk is in California, where $1.8 trillion in property is exposed.
By law, insurers must give customers 75 days’ notice before dropping coverage, and the full exit usually takes about a year as policies come up for renewal. If the governor declares a state of emergency, insurers cannot drop affected customers for up to two years.
Mortgage approvals at risk as insurance costs soar
The insurance exodus is having a direct impact on California’s mortgage market. Damon Germanides, co-founder and broker at Insignia Mortgage, told Mortgage Professional America that rising home insurance costs can jeopardize mortgage approvals.
“We get on it early on in the loan process because we don’t want the client to have sticker shock when they get their insurance quote, or it could jeopardize the loan because the traditional underwriting matrix for insurance doesn’t work anymore,” Germanides said. “In [certain] areas, they’re five times higher, sometimes, than what you’d expect.”
Germanides warned that a borrower could lose approval if they are unprepared for the true cost of insurance. “You might have just blown up your deal,” he said, noting that quotes can reach hundreds of thousands of dollars, far above expectations.
Moreover, a recent Realtor.com survey found that 75% of buyers worry insurance could soon be unaffordable, and nearly half have already had trouble getting or renewing coverage. A latest ICE Mortgage Monitor report also revealed that property insurance costs for US homeowners with mortgages hit a record high in the first half of 2025. The average yearly insurance payment for a mortgaged single-family home jumped 11.3%, or about $20 more each month, bringing the typical annual bill to nearly $2,370. Insurance now accounts for 9.6% of average mortgage expenses, the highest share on record.
Broader affordability crisis and the rise of non-QM loans
The mounting insurance crisis has pushed many buyers toward non-QM (non-qualified mortgage) loans, Germanides said, as the overall cost of homeownership rises. “What the insurance speaks to is why these non-QM loans are doing well, too, because the overall cost is higher on everything,” he said.
California’s insurance department has announced a “sustainable insurance strategy” aimed at attracting more companies to the state, including allowing catastrophe modeling to predict losses. However, the crisis remains acute, with affordability challenges spreading even to more modest home purchases.
