As California smolders in the wake of devastating wildfires that burned 12,000 homes and left billions of dollars in damage, insurance rates are set for another double-digit rise 2,000 miles away in Illinois.
Climate change-related weather events roiling insurance markets across the U.S. may well connect the dots between California and Illinois, according to industry analysts.
Allstate is increasing homeowners insurance rates in Illinois by 14.3% beginning Feb. 24, according to a filing with the state last month. The rate hike applies to a “portion” of Illinois customers, with some seeing lesser increases or no changes, an Allstate spokesperson said Monday.
“While more frequent, severe weather and higher repair prices have increased insurance claim costs, customers continue to get competitive prices with Allstate and can save money by bundling home and auto,” Allstate said in a statement.
In its filing, Northbrook-based Allstate said nearly 248,000 customers in Illinois will be affected by the 14.3% homeowners rate increase next month.
Last year, Allstate raised homeowners insurance rates in Illinois by 12.7%, while State Farm implemented a 12.3% increase in May.
“We do not currently have a homeowners rate increase filed in Illinois for 2025,” a spokesperson for Bloomington-based State Farm wrote in an email Monday.
While not directly related to the California wildfires, which have left thousands homeless and generated rebuilding cost estimates ranging from $30 billion to more than $250 billion, insurance rate hikes in Illinois and other states are being driven by the increasing prevalence of extreme weather events.
In December, the Senate Budget Committee released a report about the impact of climate change weather events on insurance markets, which has precipitated a homeowners “insurance crisis” as providers raise rates or pull out of states across a wide swath of the U.S.
“Climate change is no longer just an environmental problem,” the report concludes. “It is a looming economic threat.”
Florida, Louisiana, North Carolina and California top the list of states where it is getting harder to insure homes because of everything from wildfires to hurricanes. But the issue has destabilized markets from New England to Hawaii as insurance providers decline to renew homeowners policies, according to the report.
Illinois fared better than most states on the homeowner’s insurance nonrenewal list, ranking 43rd, according to the Senate report.
In California, about 22% of the buildings in the Pacific Palisades fire and 12% in the Eaton fire are covered by the state’s FAIR plan, insurance of last resort for homeowners unable to obtain coverage from traditional providers. The FAIR plan — a syndicated pool of property insurers — has nearly $5 billion of potential exposure in the Pacific Palisades and Eaton fires, and has already received more than 3,600 claims, according to an update Friday on its website.
Shannon Martin, an insurance industry analyst for Bankrate, said the California wildfires will create a massive insurance liability that may raise rates down the road for neighboring states, and perhaps even Illinois.
“There’s going to be a huge depletion of resources in terms of labor, in terms of lumber, all the building materials that someone needs to rebuild their home,” Martin said. “And so if you live in Nevada and you have a fire at your home, it might cost your insurance company way more than what they calculated to rebuild your home.”
Beyond the increase of weather-related events — from coastal states getting slammed by hurricanes to extreme storms across the nation – the insurance cost of the California wildfires may also spread to other states.
If the losses are big enough, Martin said insurance companies may have to pay more for reinsurance — the insurance company for the insurance companies — resulting in increased rates for policyholders far from the California wildfires.
For Illinois homeowners, that bill could well come due next year, she said.
“No one really foresaw the LA wildfires happening the way that they’re happening,” Martin said. “So we know there is going to be a domino effect from that. It’s just going to take a while to see what that is.”
rchannick@chicagotribune.com