In the last couple of weeks, State Farm and Allstate have exited California’s homeowners market. Before those loud, public announcements, AIG had already pulled back in California.
Not only that, AIG stopped writing homeowners policies in the 200 zip codes around the country including the PIA Western Alliance states of Montana and Idaho as well as New York, Delaware, Florida, Colorado and Wyoming.
AIG’s decision is noted as being very important because its going to curtail policy writing in states not normally considered high-risk for wildfire, or other natural disasters.
Here’s the reason.
The American Property and Casualty Insurance Association (APCIA) says natural disaster losses from 2020 to 2022 hit an insured damage record of $275 billion. Milliman’s Nancy Watkins says adding to that replacement costs impacted by high inflation and insurers are looking very, very carefully at who they insure.
“The risk is unprecedented and the peak risks, which are what cause insurance companies to worry about insolvency, are the ones having the most change with climate,” she said. “What we should expect to see is more of these pockets of insurance unavailability, where the market contracts.”
Look for insurers to grow ever more picky going forward, and for more insurers to start leaving higher risk markets.
Usually, insurers look into the past to predict risk. However, some states ban that practice in small ways, others ban it in bigger ways. These days, with bigger and bigger losses impacting the bottom-line, insurers are looking forward to decide what rates should be and whether they should accept the risk at all.
That looking forward is why the AIGs, State Farms and Allstates — and in Oregon — the Oregon Mutual’s to leave the homeowners insurance market.
And when homeowners can’t find insurance, many states have an insurer of the last resort to help them out. As the debt-plagued National Flood Insurance Program (NFIP) demonstrates, that can become an expensive proposition for the taxpayer.
Source link: Insurance Business America — https://bit.ly/3oYGaLb
Source link: Insurance Journal — https://bit.ly/3Co8Hgi
Source link: PropertyCasualty360.com — https://bit.ly/3NuAy4U
