Although still above-average, a reduction in the level of catastrophe losses during 2018 was the main driver of an improved combined ratio reported by U.S. homeowners insurers in the year, according to A.M. Best.
U.S. homeowners carriers posted a combined ratio of 103.7% in 2018, which, is an improvement of 3.1% on the same period in 2017, notes A.M. Best in a new report, ‘U.S. Homeowners Carriers Stand Firm Following a Myriad of Catastrophe Events’.
The report finds that while catastrophe losses were above-average in 2018, the underwriting performance of U.S. homeowners insurers benefitted from higher rates, enhanced pricing segmentation, and in certain markets, favourable reinsurance pricing.
Despite losses from catastrophe events in 2018 still coming in above-average, the total did decline when compared with 2017, which in turn led to an improved combined ratio for the group year-on-year, explains the ratings agency.
Furthermore, catastrophe activity has again fallen in 2019, but despite this, A.M. Best says that the underwriting performance was relatively unchanged in light of elevated non-catastrophe losses that largely remained in the retention levels of insurers.
In 2018, the U.S. homeowners segment reported an increase in net premiums written by 7.3% compared with an increase of 2.6% in 2017, which A.M. Best says is a result of changes in underlying rates and enhanced pricing segmentation.
Over the last ten years, says A.M. Best, net premium written has grown by more than 50% to USD 88.4 billion in 2018, compared with USD 56.2 billion in 2008, which the ratings agency says shows how important the segment is to the overall U.S. property and casualty (P&C) industry.
In an effort to improve efficiency and underwriting, numerous players in the U.S. homeowners market have invested a significant amount of resources into new technologies.
However, the sector continues to face challenges from numerous headwinds, including ongoing exposure to natural catastrophes, wildfires and non-weather related water claims.
At the same time, a potential increase in reinsurance rates and an effort among reinsurers to limit concentrations, could drive some additional pressure to some of the more thinly capitalised players in the market, warns A.M. Best.
