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KBW predicts homeowners’ rates to accelerate soon

7th February 2022 - Author: Pete Carvill

Despite homeowners’ rate increases being lower, analysts at KBW have said they expect them to accelerate soon.

industry-growth-graphPredicting a period comparable to that between 2007 and 2009, KBW said that the accelerating broad rate increases will come as a response to ‘persistently accelerating loss cost trends’, excluding catastrophes.

Writing in its latest analysis of data, KBW wrote: “Homeowners’ loss cost inflation is also worsening; although current homeowners rate increases remain below loss trends, we expect several factors (including climate change concerns stemming from recent losses, financial inflation, and rising property reinsurance costs, among others) to eventually drive prices higher.”

It added: “In the meantime, we remain cautious on personal insurers whose near-term written and earned rate increases remain below loss trends (partly reflecting several states’ slow regulatory approval processes). While rate increases should eventually lower loss ratios, we expect that to mostly emerge in 2H22, limiting personal insurers’ near-term upside.”

KBW picked out a few wider trends from the data.

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It said: “ISO’s 3Q21 Fast Track data shows persistently high – and often accelerating – severity trends, mainly for physical damage and property damage liability coverages, along with significant y/y personal auto claim frequency increases for all coverages. High severity trends likely persisted or accelerated into 1Q22, with ongoing supply chain disruption and still- rising used vehicle prices, which – combined with normalizing claim frequencies – should pressure 1H22 underwriting results.”

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