Record weather-related losses challenge US homeowners insurers in 2024: S&P

This year is on track to surpass 2023’s record weather-related losses for U.S. homeowner insurers, posing challenges in estimating catastrophe risk charges, according to S&P Global Ratings.

U.S. homeowner insurers have faced several years of underwriting losses due to increasing severe weather events. In the first half of 2024 alone, insurers suffered $39 billion in insured losses, up from $35 billion in the same period in 2023, largely due to severe convective storms.

To address these mounting underwriting losses, insurers are employing various strategies to mitigate risks. These include raising rates, increasing deductibles (either overall or by specific perils like wind and hail damage), reducing coverage limits, nonrenewing policies to lessen geographic concentration, or even exiting the market.

Insurers are also working to lower expenses and share risks with policyholders to improve profitability.

Despite these efforts, operating margins have remained tight over the past two years as primary insurers retained more risks on weather-related events amid a hard reinsurance market.

According to pricing survey data, homeowners insurance rates have risen nearly 23% cumulatively from 2019 to 2023, while loss severity has increased by 31% over the same period, leading to weak underwriting profits for the industry.

“While we expect limited rating pressure over the next 12-24 months for the top homeowners insurers because they are generally well-capitalised and diversified, we also believe heightened weather-related losses will underpin volatile underwriting results.” said S&P.

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