Fitch: U.S. Homeowners Insurers to See Improved 2023 Results on Premium Growth
Fitch Ratings, Chicago, said U.S. homeowners’ insurance is poised to post a statutory underwriting loss for 2022 reported results, as insurers continue to face above-average catastrophe losses and claims cost uncertainty from persistently high inflation and heightened macroeconomic volatility.
However, the report said further material rate increases in most jurisdictions support strong premium growth in 2023, with segment results likely to improve going forward.
Nonetheless, uncertainty related to catastrophe experience and claims severity patterns may inhibit a near-term return to an underwriting profit. “We anticipate the property/casualty industry will post a statutory underwriting loss in homeowners for the year, with a segment combined ratio projected at 105%,” said Fitch Managing Director James Auden, noting the segment combined ratio exceeded 100% for five of the last six years.
Volatility in performance continues to hinge on catastrophe loss experience; larger underwriters benefit from capabilities in managing catastrophe exposures and risk aggregations and garnering efficiency from technology investments. Aon’s recent catastrophe report estimates insured catastrophe losses in the U.S. exceeded historical averages at $99 billion in 2022, the third consecutive year that losses exceeded $90 billion. Insured losses from Hurricane Ian could ultimately represent half of all 2022 catastrophe losses. Additional U.S. events with insured losses in excess of $1 billion in 2022 include multiple inland storms, and wildfire and drought in western states.
“Given the more fragile economic environment homeowners’ writers will need to renew focus on several areas including: insuring properties to value under unique housing and construction market conditions, factoring inflation and tight labor market conditions in pricing and claims estimation and utilizing information technology to boost operating efficiency and customer experience in the application and claims process,” Fitch said.
The report also said questions remain as to the effectiveness of recent legislative and regulatory changes in the Florida homeowners’ market to temper claims trends and improve the underwriting environment. It said homeowners underwriting losses for the industry show that 2022 losses are tempered by a substantial portion of Ian losses borne by Florida state sponsored entities and global property reinsurers. Still, individual carrier results are materially influenced by geographic mix relative to the location of recent weather events, and more limited Florida market participation versus other states.
Statistics show State Farm Group retains a strong lead in market share with 20% of industry premiums followed by Allstate with 10%. While these two underwriters experienced sharp increases in personal auto losses in 2022, homeowners’ results were relatively favorable as Allstate reported a GAAP segment combined ratio of 94% for the year. State Farm reported a 3% underwriting margin in its homeowners and commercial multi-peril business combined.
