Best’s Market Segment Report: US Homeowners Insurance Segment Suffers Worst Underwriting Year of Century; Population Shifts to CAT-Prone Areas Adds to Volatility
25 Julio 2024 - 7:14AM
Business Wire
With the U.S. homeowner’s insurance segment experiencing its
worst underwriting results since at least 2000, a new AM
Best report notes that a factor in the insured loss increase is
population migration into areas where weather-related events are
occurring more frequently.
The Best’s Market Segment Report, “Migration to CAT-Prone Areas
Adds to US Homeowners Insurers’ Performance Volatility,” states
that the segment suffered a $15.2 billion underwriting loss in
2023, more than double the losses seen in the previous year. The
2023 loss was also the worst this century, with $14.8 billion in
losses in 2011 the next highest.
Urbanization and rising populations have become particularly
problematic in regions susceptible to natural perils, the report
states. According to the U.S. census, California, Florida, Georgia,
North Carolina, Texas and Washington accounted for 53% of the
country’s population growth between 2010 and 2020; all six states
are prone to severe weather-related events.
“The U.S. population overall grew 7.4% between 2010-2020 but
rose 10.2% in the South and 9.2% in the West during the period,”
said David Blades, associate director, Industry Research and
Analytics, AM Best. “Population trends show residents increasingly
moving toward regions that are more prone to hurricanes, severe
convective storms or even wildfires.”
The report states that on a direct basis, insurers writing
homeowner’s coverage in the New England region recorded an average
combined ratio of 79.3 for the 10-year period ending with 2023,
compared with combined ratios above breakeven in the Pacific,
Southwestern and Rocky Mountain regions. The South Atlantic region,
which includes Florida, and the Southern region, which includes the
Gulf Coast states, posted combined ratios over 92 during this
timeframe.
“A growing population means an even larger rise in real property
development and thus in insured values,” said Christopher Graham,
senior industry analyst, AM Best. “Construction in
catastrophe-prone areas adds to flood risk. It also increases the
risk of wildfires in areas prone to them due to human activity, as
well as utility companies.”
The direct combined ratio in 17 states in 2023 surpassed the
breakeven threshold of 100. Since 2017, this number has been in
double digits every year except 2019 and 2021. Before 2017, the
count had consistently been in the single digits. According to the
report, this increase is more evidence of the impact that climate
risks and population migration has had on the homeowners segment’s
results.
Higher loss costs have been further complicated by restrictive
regulatory environments in several large, catastrophe-prone states.
Insurers, in general, now face an increasingly more common
strategic choice of whether to de-emphasize writing in or exiting
certain markets over rate adequacy concerns. Capacity tightening in
the reinsurance market, stemming from the homeowners segment’s
unfavorable underwriting results, also continues to hamper primary
carriers. Consequently, AM Best believes loss ratios will remain
pressured for these carriers, and that a return to underwriting
profitability for the segment over the near term is unlikely.
To access the full copy of this special report, please visit
http://www3.ambest.com/bestweek/purchase.asp?record_code=344852.
A video discussion about this report also is available at
http://www.ambest.com/v.asp?v=ambhomeowners724&AltSrc=182 .
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Christopher Graham Senior Industry Analyst,
Industry Research and Analytics +1 908 882 1807
christopher.graham@ambest.com
David Blades Associate Director, Industry
Research and Analytics +1 908 882 1659
david.blades@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com