Home insurance companies are suffering from a costly combination of severe storms and high inflation. They just had their worst year in a decade, with the storms costing them business over 100 billion US dollars—and customers suffer in the form of higher prices and fewer choices. Some companies are withdrawing entirely from risky markets.
A new report from S&P Global Market Intelligence The study found that American home insurers had their worst year since 2011 last year, with a net loss ratio – the ratio of their total losses to the premiums they collected – of 110.5 percent (anything over 100 percent is a net loss). In total, that equates to a loss of over $101 billion.
“Inflationary pressures, a devastating wildfire in Hawaii and a record number of billion-dollar convective storm losses weighed on the industry’s results in 2023,” the report said.
The high inflation has The cost of paying out customer claims has increased and the reinsurance policies that companies take out to protect themselves against losses have become more expensive.In addition, a series of severe storms that caused massive property damage put a strain on the industry: for example, the forest fires in Hawaii in August 2023 alone. cost insurance companies $61.5 billion.
While dangerous storms become more frequent and costly, market conditions for the $152 billion home insurance industry.
S&P found that only two of the country’s 20 largest homeowners insurance providers –Chubb and America Mutual Insurance – made money from their home insurance lines last year. Losses across the board have forced insurers to raise their rates and pass their costs on to consumers. Price increases are the easiest lever insurance companies have to increase their earnings: Last year, homeowners across the country saw price increases of 10 to 12 percent.and far exceeds inflation.
In some markets, property insurers have stopped their business altogether, citing operating costs: In Florida, one of the most expensive markets in the country due to its vulnerability to Atlantic hurricanes, Nine insurers went bankrupt or merged with competitors between 2021 and 2023This lack of competition has only driven up premiums. Other factors have included inflation, more frequent storms and high prices in the reinsurance market. Insurers pay high premiums for policies that protect them if they suffer large losses from a single storm.
“Insurance premiums in the state of Florida have skyrocketed in recent years. Part of that is reinsurance costs,” said Charles Nyce, a professor at Florida State University and insurance expert. Assets“It has been really expensive in recent years and some insurance companies cannot offer it at any price.”
Last year’s hurricane season was relatively mild, which helped companies’ revenue in Florida, one of their largest markets, but meteorologists expect this year’s hurricane season to be exceptionally costly.
“The 2024 Atlantic hurricane season is expected to have a significantly higher number of tropical storms, hurricanes, major hurricanes and direct impacts to the United States than historical averages,” said Alex DaSilva, senior hurricane forecaster at AccuWeather. he wrote in a March forecast“All signs point to a very active and potentially explosive Atlantic hurricane season in 2024.”
However, severe hurricanes are by no means the only threat. deadly hailstorms in Texas and Oklahoma and threats of Forest fires in the West underline that even more everyday hazards can pose a costly threat to insurance companies – and weather events of this kind are becoming more frequent, increasing the pressure on insurers even further.
“The perception of the threat posed by climate risks is definitely increasing,” said insurance industry analyst Steve Evans. Assets.