California’s Insurance Market Faces Another Major Shake-up
Liberty Mutual, one of California’s major insurance players, has announced it is pulling back on its condo and rental insurance offerings through its subsidiary, Safeco. This decision is expected to impact around 88,000 policyholders across the state. Starting this month, Safeco will stop issuing new policies for condos, renters, and watercraft, while all existing policies in these categories will begin non-renewals in January 2026.
While Liberty Mutual has emphasized its continued commitment to offering core Safeco products such as auto, home, and umbrella insurance in California, this decision marks a significant retreat from certain insurance lines tied to residential properties.
Liberty Mutual’s California Nonrenewal Plan Timeline
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January 1, 2025: Liberty Mutual and Safeco stop writing new business for condo, renters, and watercraft insurance policies in California.
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January 1, 2026: Liberty Mutual and Safeco stop writing new business for specialty vehicles, motorcycle, and non-good driver (standard) auto insurance products.
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January 1, 2026: Liberty Mutual begins the nonrenewal process for all affected products, including condo, renters, watercraft, specialty vehicles, motorcycle, and non-good driver auto policies.
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Ongoing in 2026: Nonrenewals are fully implemented across the state for the aforementioned types of policies.
This timeline reflects Liberty Mutual’s strategic adjustments in California, focusing on their core products while discontinuing underperforming lines of business.
Why Are Condo Insurance Policies Struggling to Stay Viable?
The decision to exit the condo insurance market in California raises questions about why these policies are challenging to sustain. Condo insurance is often significantly cheaper than homeowners insurance, with an average annual premium of $656 compared to $2,377 for homeowners coverage. However, insurers face significant challenges with these policies, particularly due to water damage, which accounts for roughly 30% of all claims. This type of damage can arise from various sources such as broken water lines, malfunctioning appliances, or roof leaks as well as natural disasters, such as wildfires, all playing a factor of unprofitability when it comes to these products.
Condo insurance, also known as HO-6 policies, typically covers the owner’s personal property and liability while complementing a master insurance policy maintained by the homeowners association. This arrangement means insurers only take on partial risk, but rising costs tied to structural rebuilding, legal liabilities, and frequent claims still significantly erode profitability.
The Role of California’s Sustainable Insurance Strategy
The challenges facing the insurance sector aren’t lost on regulators. California’s Department of Insurance, led by Commissioner Ricardo Lara, has rolled out the Sustainable Insurance Strategy to attract insurers back to the state’s volatile market. By allowing insurers to incorporate catastrophe modeling and reinsurance costs into premiums, the strategy aims to create a middle ground that balances insurers’ financial needs with consumer access to policies.
Insurers, however, must commit to writing more policies in high-risk areas if they choose to adopt this pricing model. The goal is to stabilize the market before more companies like State Farm, Allstate, and now Liberty Mutual, decide to exit or scale back operations even more than they have already.
Still, the reforms have sparked debate. Critics argue that relying on projected risks using catastrophe models—rather than historical claims data—could lead to steeper premiums for consumers, especially in areas prone to wildfires and earthquakes. While the intention of the strategy is clear, its adoption has been met with mixed signals. Liberty Mutual’s pivot away from condo and rental markets, for instance, suggests some insurers remain cautious despite the regulatory adjustments.
Ripple Effects on California Residents and Small Businesses
For the 88,000 policyholders affected by Liberty Mutual and Safeco’s exit, the loss of options means greater pressure to find affordable and comprehensive coverage elsewhere. Experts predict that many may turn to surplus line insurers, which are less regulated but often come with much higher premiums. Compared to the standard market, costs in the surplus market can be two to three times higher, putting significant financial stress on policyholders.
Small businesses, particularly those tied to multifamily rental properties, are also likely to feel the impact. Businesses with commercial insurance needs, such as landlords and condo owners, might ultimately pass on higher costs to renters or residents, further exacerbating housing affordability challenges in California.
While the Sustainable Insurance Strategy holds promise in stabilizing the market, it’s clear that broader efforts are needed to ensure those at the center of this shift—residents and small businesses—don’t bear the brunt of the consequences. For now, as Liberty Mutual and Safeco refocus on core products, California policyholders must evaluate their options, leading many to adopt a more proactive approach to navigating their insurance needs during uncertain times.