Moody’s Homeowners Insurance Report — Rates Up, Profits Down

Moody’s has released a new report on homeowners insurance. Rates are up and profits are way down. Rates went up an average of 23% in 2023 but profits dropped. That has led insurers to try to find ways to increase profits.

According to the Moody’s report, rate raising is not working all that well.

“Profitability in the U.S. homeowners’ insurance sector has been weak in recent years as a result of exposure growth in catastrophe-prone areas, persistently high weather-related losses and rising costs to rebuild and repair homes,” the Moody’s report said. “Homeowners insurers have responded with sharp increases in premiums and tighter policy terms, and some have exited high-risk regions.”

The report notes that in the last decade the combined ratio for the homeowners line averages 101.3. that means insurers have paid out more than the premiums they’ve charged. To combat that, homeowners insurers have raised rates and eliminated some underperforming business.

As you know, they’ve also left some high-risk areas like parts of California. And in the last five years, almost every state has seen a doubling of homeowners insurance rates.

State run insurers of last resort are now collecting around 3% of all premiums and are covering homes in high-risk areas that are now not covered by private insurers.

Moody’s Chief Research Officer for Insurance Solution Robert Muir-Wood did a blog on the topic about the same time as the report was released. He points to the causes behind the average rate increase of 23%. Here is his list:

  • Climate change
  • Unprecedented economic shocks
  • Coverage crises
  • Global supply chain stress
  • Geopolitical strife
  • Aging infrastructure
  • Cybersecurity uncertainty
  • Long-tail liabilities

“These risks are affecting all businesses, the business of risk itself, and the state of the risk landscape,” Muir-Wood wrote.

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