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Homeowners insurance to show modest underwriting loss: Fitch

19th February 2021 - Author: Katie Baker

Global rating agency, Fitch Ratings has released a report which suggests that the U.S. P&C industry will to shift to a modest statutory underwriting loss in homeowners’ insurance for 2020 reported results.

Fitch-RatingsU.S personal lines underwriters have been faced with unique challenges in the homeowners’ line, with losses rising as a result of natural catastrophes and managing operations amid the COVID-19 pandemic.

However, except from another overly severe catastrophe season in 2021, the segment is likely to post underwriting gains as market fundamentals remain stable, with pricing momentum expected to support future performance.

The homeowners segment is likely to show modest future core underwriting and expense improvement in 2021, as volatility in performance continues to hinge on catastrophe loss experience.

Larger underwriters benefit from capabilities in managing catastrophe exposures and garnering efficiency from technology investments.

Premium rates in homeowners continue to generally experience modest increases, with prices moving more substantially in loss affected markets such as Florida, which saw continued performance deterioration and a decline in capitalisation levels.

However, overall capital levels for the industry remain very strong under several observed measures, providing most individual insurers with resources to absorb near-term volatility and the effects of adverse events.

The segment’s catastrophe losses reported by eight publicly traded insurers that break out homeowners’ business in GAAP filings rose by 45% in 2020, adding 24 points to the group’s segment loss ratio vs 18 points in the prior year.

However, the aggregate calendar year Combined Ratio (CR) was virtually unchanged at 92% YOY due largely to 4.5 points of favourable prior year reserve development in 2020.

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