State of the Homeowners Insurance Market

With weather-related losses at an all-time high, the homeowners insurance market continues to be hard hit. AM Best recently revised its outlook for the segment from stable to negative as a result of three consecutive years of net underwriting losses owing to elevated natural catastrophes that have continued in the first half of 2023, combined with other ongoing market challenges such as inflationary pressures and rising reinsurance costs.

Insured losses stemming from natural catastrophes rose to $50 billion in the first half of 2023, according to reinsurer Swiss Re, with severe thunderstorms accounting for 70% of total insured losses. In the United States alone, thunderstorms caused insured losses of $34 billion, the highest ever in a six-month period.

Insurers Rebalancing Their Homeowners Portfolio

The impact of these losses on the insurance market is forcing insurers to take a hard look at their books of business and make difficult decisions. Companies like Kemper, Allstate, State Farm, Farmers, USAA, AIG, AmGUARD Insurance, Falls Lake Insurance, and Chubb are either exiting or restricting where they write coverage in California due to worsening wildfires in the state. Triple A, Farmers, and most recently, Progressive stopped writing some policies in hurricane-prone Florida. Nationwide just announced it’s non-renewing thousands of policies in eastern North Carolina.

It’s not only the weather that has left carriers cold when insuring homes in California, Florida, Louisiana, and other states. Wildfires and frivolous lawsuits are also driving up premiums. Insurers have been calling for reforms in California for years and recently saw some positive movement when the state’s governor announced changes that would allow carriers, for the first time, to factor into homeowners’ rates the increasing risks of extreme weather and wildfires.

Frivolous lawsuits have exacerbated the Florida homeowners insurance market, adding pressure on rates to keep up with claims litigation involving roofing scams. During the last three years, 80% of property claim lawsuits in the country have been in Florida, compared to just 9% of the claims. Floridians pay more for homeowners insurance than the national average, with premiums set to continue to rise. According to an analysis by the Insurance Information Institute, Floridians pay $6,000 a year on average for homeowners insurance, up 42% from last year. The average in the United States is $1,700.

What Are Homeowners Doing About Rising Rates, Restricted Coverage?

Those living in disaster-prone areas where coverage is difficult to obtain are increasingly buying last-resort insurance policies. More than 30 states have some form of last-resort plan for individuals unable to get coverage in the admitted or non-admitted insurance market. Plans can be statewide or restricted to coastal regions. Coverage varies between states, ranging from all-perils policies to those that cover wind, hail, or fire only. Florida, California, and Louisiana have seen policyholder numbers for their last-resort plans more than double within the past five years, according to an article in The Wall Street Journal.

Last-resort plans were intended to serve as temporary safety nets. However, as the private market declines, these policies become insurers of first, rather than last, resort in some high-risk locations. With 1.4 million policies, Citizens Property Insurance’s last-resort plan is the largest home insurer in Florida.

Some homeowners are choosing to go without coverage. In Florida, nearly 15% of homeowners do not have insurance, double the national rate, according to Mark Friedlander, spokesperson for the Insurance Information Institute. This is an option only for those without a mortgage.

ISC’s Homeowners Product

We have a homeowners product available in non-catastrophe-exposed areas in California, with our sweet spot for homes in the $400,000 to $1.5 million range. We also can provide homeowners insurance in Florida, excluding wind. Our product is available x-wind within 50 miles of the coast in North Carolina. In all other parts of the state, we can write wind coverage. In addition, our homeowners product is available with wind included in Tennessee, Virginia, and Maryland.

You can email submissions to homeowners@iscmga.com.