From Artemis, July 25:
When the rising cost of property and catastrophe reinsurance in the United States gets called out as affecting the affordability of insurance, commentators would do well to remember just how poorly US homeowners property insurance underwriters have performed.
Reinsurance pricing is often cited as having a negative effect on the affordability of homeowners insurance in the United States, in particular in catastrophe exposed states such as Florida and California.
But the way reinsurance pricing has been rising is not at all surprising, when you consider just how unprofitable the homeowners insurance business has become.
Rating agency AM Best highlighted this today, in reporting that last year the United States homeowner’s insurance segment experienced its worst underwriting results since at least 2000.
In fact, the segment suffered a $15.2 billion underwriting loss in 2023, which was more than double the losses seen in the previous year.
AM Best explained that the 2023 loss was also the worst experienced this century, with $14.8 billion in losses in 2011 the next highest figure.
The rating agency notes that continued shifts in population towards catastrophe prone regions of the US, is a key driver.
“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,” David Blades, associate director, Industry Research and Analytics, AM Best explained. “Population trends show residents increasingly moving toward regions that are more prone to hurricanes, severe convective storms or even wildfires.”
It’s not just the population shifts though, it’s also the increasing values-at-risk of natural catastrophes and severe weather, with inflation a further driver, that are driving loss potential higher in catastrophe prone regions.
“A growing population means an even larger rise in real property development and thus in insured values,” added 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.”....
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