$93bn premium forecast in US homeowners’ insurance

US homeowners’ premiums increased from $89 billion in 2015, to $91 billion in 2016, and are expected to reach $93 billion in 2017, according to Aon Benfield’s annual Homeowners’ ROE Outlook report, which forecasts continued growth in direct US homeowners’ insurance premiums for 2017 despite a decreasing return on equity (ROE) for insurers.

The study highlights that the top 20 US homeowners’ insurers secured an average countrywide rate increase of 3 percent during the 18 months to August 2017, with the highest average rate increase of 7 percent being achieved in the Texas and North Carolina.

Meanwhile, Florida insurers achieved an average rate increase of 5 percent during the period, which will likely be insufficient to maintain their current ROE levels given the increased costs facing the state’s carriers from benefits and claims adjustments.

According to the report, prospective 2017 after-tax ROE for US homeowners’ business was 4.5 percent on a countrywide average (2016: 6.7 percent), and 9.1 percent excluding the state of Florida.

Challenges to the ROE projections include a slowdown in insurers’ rate increases against a backdrop of loss and expense inflation, and an increased AM Best capital charge resulting from insurers’ premium and exposure growth—which is currently being offset by reduced reinsurance costs.

Greg Heerde, head of Americas Analytics for Aon Benfield, said: “Given the year-on-year increase in premiums, US homeowners’ insurance can be considered a growth engine within the industry. However, we continue to monitor this line business carefully, as it is difficult to say at this stage whether insurers’ approved rate increases will be sufficient to match their loss and expense inflationary pressures of the future.”

Parr Schoolman, head of Aon Benfield’s Risk and Capital Strategy team, added: “Using advanced data and analytics, we are continuing to develop tools and services that provide clients with insight, at a granular level, into which homeowners’ risks are most likely to be profitable and are in alignment with their overall capital strategy.”

Developed by Aon Benfield Analytics and updated annually, the Homeowners’ ROE Outlook report provides a comprehensive analysis of the US homeowners’ insurance sector, based on industry aggregate state level statutory financial filing information along with rate filings and supporting actuarial information for the 20 top US homeowners’ insurance groups by state.

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