Analysis by global insurance and reinsurance broker, Aon, claims that U.S. homeowners direct written premiums are projected to hit $105 billion in 2020, representing an increase from the $104 billion total recorded for 2019.
Aon’s latest Homeowners ROE Outlook report, which is developed by the firm’s Reinsurance Solutions’ Analytics team, predicts continued growth in U.S. homeowners insurance premiums for 2020, with a stable prospective return on equity (ROE) for insurers assuming a normal level of catastrophe losses.
The projected increase in premiums to $105 billion comes in light of rate activity and documented growth through the second-quarter of the year, with the COVID-19 pandemic and subsequent economic downturn having little impact on the sector.
Additionally, Aon finds that a prospective 6.6% ROE was forecast for U.S. national multiline insurance companies into 2021, which is up slightly on the 6.5% reported in the 2019 forecast.
According to the report, achieved ROE is likely to fall short of the actuarial forecast due to cat loss activity from hurricanes, wildfires, and also severe convective storms.
During the 18-month period ended September 30th, 2020, Aon’s study shows that U.S. homeowners insurers secured an average national approved rate increase of 3%, with the strongest momentum witnessed in both California (8%) and Florida (6%), two regions heavily impacted by catastrophe events in recent years.
Greg Heerde, Head of Americas Analytics for Aon’s Reinsurance Solutions operation, commented: “Our analyses show that the prospective returns of the U.S. homeowners sector remain stable. Looking ahead, and despite the economic headwinds we are currently experiencing, a host of support programs including loan forbearance, COVID premium assistance offered by insurers, and fiscal stimulus to the owners of the homes and policies should help prevent premium contraction in 2020.”
Paul Eaton, Senior Managing Director in Analytics for Aon’s Reinsurance Solutions, added: “We are pleased to report continued positive momentum in the U.S. homeowners sector. Close attention should be paid to financials as the year draws to a close, but it should be highlighted that despite 2020 seeing landfall records in Atlantic storms and perhaps the second most damaging convective storm and wildfire seasons on record, we’re still far short of several of the annual industry catastrophe loss totals recorded in the 21st century.”