I spoke to Rex Frazier, president of the Personal Insurance Federation of California, who cited several policies that no doubt contributed to State Farm’s decision to stop issuing policies, including various price controls that prevent insurers from raising prices to meet surging costs without the written approval of the California Department of Insurance.

“California is the only state in the country that doesn’t allow insurers’ rates to be based upon actual reinsurance costs,” Frazier said. “California’s regulations employ a legal fiction that each insurer uses its own capital to serve customers. As reinsurance costs go up, insurers cannot have their rates reflect those higher costs.”

Many will cling to the theory that climate change is the real culprit. Those who favor this theory should be asked why California is particularly prone to the externalities of climate change.

[Price caps lead to shortages, every single time. Climate change isn’t the issue here, and even the damage from forest fires isn’t the direct cause. To the extent it does impact the decision, it’s because California refuses to properly and responsibly manage their forests, as Miltimore explains more fully. — Ed]