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US homeowners sector remains robust following significant catastrophe losses, according to Aon annual report

CHICAGO, 22 October, 2019 – Aon’s Reinsurance Solutions business today launches its annual Homeowners ROE Outlook report, which forecasts continued growth in US homeowners insurance premiums for 2019 with an increasing return on equity for insurers.

The report reveals that US homeowners direct written premiums had increased from USD71 billion in 2010, to USD98 billion in 2018, and are projected to reach USD102 billion in 2019 given prospective rate activity. Rate increases have slowed in more recent years, with 2019’s prospective rate changes indicating marginal increases, and even decreases, in some states through September.

The study highlights that US homeowners insurers secured an average countrywide approved rate increase of three percent during the 18 months to September 2019, compared to four percent in the prior year period. Rate changes in California showed continued positive momentum with a joint highest increase of seven percent, along with Washington and Georgia.

Florida achieved a rate increase of three percent, and it remains to be seen if this will be sufficient now that the Florida legislature has attempted to address challenges from assignment of benefits and claims adjustment cost issues.

According to the report, for carriers with national footprints, and a resulting diversification benefit, prospective 2019 after-tax return-on-equity (ROE) for US homeowners business was 6.5 percent on a countrywide average. While this figure was lower than the target 10 percent return, 24 individual states made the 10 percent hurdle.

Meanwhile, 39 states post a modeled combined ratio below 100 percent amid ROE headwinds from wildfire risk and increases in the modeled risk perspective for that peril.

This year’s study pushes beyond the total industry aggregate view of past iterations to present two strategies at opposite ends of the competitive spectrum: firstly, that of the massive national multiline carriers whose primary competitive advantage is scale; and secondly, the monoline specialist that can focus on depth of expertise with a single product in a single market. The report provides thorough comparative analyses of the two groups.

Greg Heerde, Head of Americas Analytics for Reinsurance Solutions, said: “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.”

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.”

Developed by Reinsurance Solution’s Analytics team and updated annually, the Homeowners ROE Outlook report provides a comprehensive analysis of the US homeowners insurance sector, based on industry state level statutory financial filing information along with rate filings and supporting actuarial information.

To view the 2019 Homeowners ROE Outlook report, please click on the following link:

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