The US homeowners sector remains robust in spite of the devastating and costly impacts of 2017 and 2018 catastrophe events, with further premium growth expected in 2019, according to re/insurance broker Aon’s annual Homeowners ROE Outlook report.
The report finds that US homeowners direct written premiums increased to USD 98 billion in 2018 from USD 71 billion in 2010, and are expected to reach USD 102 billion in 2019 given prospective rate activity.
In more recent times, Aon notes that rate increases have slowed in the sector with marginal increases, and even decreases indicated in some states. During the 18 months to September 2019, US homeowners secured an average countrywide approved rate increase of 3%, which is down on the 4% in the prior year period.
By region, and the report reveals that rate changes in California showed continued positive momentum with an increase of 7%, as did Washington and Georgia. The State of Florida achieved a rate increase of 3%, and Aon says that only time will tell of this is sufficient in light of legislation in the state aimed at mitigating the impacts of AOB abuse.
The report also states that prospective 2019 after-tax return-on-equity (ROE) for US homeowners business was 6.5% on a countrywide basis, and while this is below the 10% target, 24 states did meet this hurdle.
Furthermore, 39 states posted a modelled combined ratio of under 100% amid ROE headwinds from wildfire risk and increases in the modelled risk perspective of the peril class.
“Hurricanes and wildfires caused significant losses for US insurers in 2017 and 2018. While the homeowners sector has remained robust, ripples are still being felt through the insurance, reinsurance, and capital markets as underwriters and capital providers reevaluate their true risk levels,” said Greg Heerde, Head of Americas Analytics for Reinsurance Solutions.
Paul Eaton, Managing Director in Analytics for Reinsurance Solutions, added: “Current trends suggest that the national carriers are facing rate pressure in homeowners business from competition and market forces, while the single-state specialists are maintaining rate increases.
“As the overall macroeconomic situation shows signs of instability, it will be important for all those writing this business to stay ahead of any inflationary pressures that emerge.”
