Large U.S. insurer Nationwide Mutual Insurance has announced that it is taking “specific business actions” in an effort to mitigate risk and manage its personal and commercial lines portfolios, citing the economic landscape, inflation, and catastrophic weather events.
The insurer notes that these actions are impacting the entire insurance industry, and this is evidenced by the fact Nationwide is one of a growing number of carriers operating in the U.S. to announce a pullback from certain business in recent months.
Within its personal lines portfolio, the firm states that it is requiring pre-quote documentation for new business commencing June 14th for some products in certain states.
What this means is that Nationwide will ask for the required documentation to be submitted upfront, before it will return any quotes.
The insurer told us that this means it will have an opportunity to review potential new business, before it offers any quote or coverage.
The company expects that this change will likely reduce its new business, but noted that it is not expected to eliminate new quotes in products and states affected.
Additionally, Nationwide is taking action to balance risk within its small and middle market commercial lines business.
While it’s unclear exactly what products and in what regions the company is taking action, there is definitely a trend here.
Last week, AIG and Farmers Group joined the likes of State Farm and Allstate in cutting exposure to climate and catastrophe exposed risks, notably in the states of Florida and California, which have experienced elevated catastrophe losses in recent times, among other issues.
In Florida, the trend of insurers and reinsurers retreating from the property market has been going on for some time, but it is also happening in other parts of the country.
Other factors, such as rising litigation claims could also be playing a role. Again, in Florida this has been an issue for some time, but it’s also becoming more of an issue elsewhere in the U.S.
It suggests that insurers operating in the country and in these lines of business could be losing control of their ability to predict forwards claims frequency, and are in turn looking to restrict new business to obtain a clearer view of their portfolios and better understand their exposure going forwards.
Of course, this is all happening amid a hard reinsurance market in which rates are up, especially for catastrophe business. The higher cost of reinsurance means that buyers either have to pay more for protection or retain more of the risk themselves, or cut back from certain exposures in order to protect their balance sheets.
It could mean that some decide to purchase more reinsurance to offset the uncertainty, but with rates continuing to rise, this might not be a viable option for some.
There was already an expectation that the firm reinsurance market environment would persist into 2024, and this trend could intensify market dynamics as the supply demand imbalance shifts.
