Underwriting Discipline and Increased Pricing Helped Offset Elevated Losses for U.S. Homeowners Insurers

Despite above-average catastrophe losses in 2018, the underwriting performance of U.S. homeowners insurers benefited from rate increases, enhanced pricing segmentation and favorable reinsurance pricing in most markets, according to a new AM Best report.

Source: AM Best | Published on November 5, 2019


A new Best’s Market Segment Report, titled, “U.S. Homeowners Carriers Stand Firm Following a Myriad of Catastrophe Events,” states that homeowners carriers posted a combined ratio of 103.7 in 2018, a 3.1-point improvement from the previous year, largely driven by a reduced level of catastrophe losses. While catastrophe activity further declined in 2019, underwriting performance was relatively unchanged due to an increase in non-catastrophe losses that largely remained in insurer’s retention levels. Changes in underlying rates and enhanced pricing segmentation helped the homeowners segment to increase net premiums written (NPW) by 7.3% in 2018, versus 2.6% in 2017. Over the last decade, NPW has grown by more than 50%, to $88.4 billion in 2018 from $56.2 billion in 2008, demonstrating the segment’s importance as part of the overall property/casualty industry.

Homeowners insurers continue to invest a significant amount of resources into technology to improve their underwriting and pricing tool sets. Advancements in predictive modeling and pricing analytics, as well as the use of third-party data, continue to bolster the segment. Risk appetites have also tightened, as companies focus on long-term underwriting profitability and better management of volatility in results.

However, the homeowners’ insurance market continues to face headwinds stemming from ongoing exposure to natural catastrophic events, wildfires and non-weather related water claims. Additionally, reinsurers are seeking to increase rates and limit concentrations, which may potentially pressure some more thinly capitalized companies.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=291118.