Homeowners insurance outlook: insurers paid out a staggering $100 billion last year

Home insurers are being hit hard by the costly combination of severe storms and high inflation. They just had their worst year in a decade, with storms causing their business to suffer more than 100 billion USD—and customers are suffering for it in the form of higher prices and fewer choices, as well Some companies choose to exit the risky market altogether.

ONE new report from S&P Global Market Intelligence found that U.S. home insurers posted their worst year since 2011 last year, recording a net combined ratio — or the ratio of their total losses to the premiums they collected. gain — is 110.5% (anything above 100% represents a net loss). That represents a total loss of more than $101 billion.

“Inflationary pressures, devastating wildfires in Hawaii and record billions of dollars in losses from convective storms weighed on industry results in 2023,” the report said.

High inflation has spurred increase the cost of paying customer claims and make reinsurance contracts that companies buy to protect themselves from losses more expensive. Furthermore, a string of severe storms causing extensive property damage has weighed on the industry: The Hawaii wildfires in August 2023 alone, for example, causing insurance companies to lose $61.5 billion.

As dangerous storms become more common and more costly, market conditions are not getting any better. The home insurance industry is worth $152 billion.

S&P found that only two of the 20 largest homeowners insurance providers in the country—Chubb and America Mutual Insurance—monetized their home insurance line last year. Widespread losses have forced insurers to raise interest rates, shifting costs to consumers. Raising prices is the easiest lever insurance companies have to increase profits: Homeowners nationwide have faced price increases of 10-12% over the past yearfar exceeds inflation.

In some markets, home insurers have gone out of business entirely, citing operating costs: In Florida, one of the most expensive markets in the nation because of exposure to the Atlantic hurricanes Positive, Nine insurers dissolved or merged with competitors between 2021 and 2023. That lack of competition only pushes insurance premiums up. Other factors include inflation, more frequent storms and high price trends in the reinsurance market. Insurance companies have had to pay high interest rates for policies that protect them in case they suffer large losses because of just one storm.

“Insurance premiums in the state of Florida have skyrocketed over the past few years. Part of that is reinsurance costs,” said Florida State University professor and insurance expert Charles Nyce. Luck. “Over the past few years, it has been really expensive and some insurance companies cannot afford it at any cost.”

Last year’s hurricane season was relatively mild, which boosted companies’ profits in Florida, one of their largest markets. But meteorologists predict this hurricane season will be especially costly.

“The 2024 Atlantic hurricane season is forecast to be well above the historical average for tropical storms, hurricanes, major hurricanes,” said AccuWeather Storm Forecaster Alex DaSilva. and direct US impacts.” wrote in a March forecast. “All signs point to a very active and potentially explosive Atlantic hurricane season in 2024.”

However, major storms are not the only threat. Recently Deadly hail in Texas and Oklahoma and the threat of forest fires in the West highlights that more common hazards can also pose costly threats to insurers—and these types of weather events are becoming more common, making insurers encountering more and more difficulties.

“There is certainly a growing awareness of the threat from climate risk,” says insurance industry analyst Steve Evans. Luck.


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