OLDWICK, N.J.--(BUSINESS WIRE)--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.
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.
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