American home insurers faced significant losses last year due to population growth in disaster-prone regions and other factors, as reported by global credit rating agency AM Best.
The home insurance segment experienced a $15.2 billion underwriting loss in 2023, more than double the losses from the previous year, making it the worst loss this century. The states of California, Florida, Georgia, North Carolina, Texas, and Washington accounted for over half of the country’s population growth between 2010 and 2020, all of which are susceptible to severe weather conditions, noted AM Best.
Population trends indicate a shift towards regions prone to hurricanes, severe storms, and wildfires, according to David Blades, an associate director at the firm.
California faces fire and flood disasters, while Washington is vulnerable to floods and severe storms. Texas is at risk of fires and floods, Florida is prone to flooding, and North Carolina and Georgia sometimes experience floods and severe storms.
Last year, combined ratios exceeded 100 percent in 17 states, with the Pacific, Southwestern, and Rocky Mountain areas surpassing this threshold. Christopher Graham, a senior industry analyst at AM Best, highlighted the rise in real property development and insured values in catastrophe-prone areas, increasing flood and wildfire risks.
AM Best criticized restrictive regulatory environments in disaster-prone states for exacerbating challenges faced by the home insurance sector. The firm believes a return to profitability in the near term is unlikely for the industry.
With home insurers facing high costs, homeowners are also feeling the burden of rising insurance rates. LendingTree data shows a 5.8 percent increase in home insurance rates nationwide in the first quarter of 2024, with significant hikes in states like Nebraska, Illinois, and Montana.
A LendingTree survey revealed that nearly a third of Americans struggle to afford their home insurance premiums, with concerns about homes becoming uninsurable. Nonrenewal notices from insurance companies can be daunting for homeowners.
As weather forecasters predict a lively hurricane season, homeowners may face further rate hikes and limited insurer options. Major insurers are leaving high-risk states like Florida and California, potentially making the highest-risk areas uninsurable.
Insurify’s Betsy Stella emphasized the importance of mitigation to reduce costs for everyone, while Karen Collins of the American Property Casualty Industry Association urged homeowners, renters, and businesses to take steps to mitigate losses from disasters by strengthening their properties.
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