Homeowners Insurance Outlook: Insurers Paid Out a Staggering $100 Billion Last Year

Home insurance companies are being hit by a costly combination of severe storms and high inflation. They just had their worst year in a decade, with storms costing their business more than $100 billion, and customers are suffering for it in the form of higher prices and fewer options as some companies opt out. completely from risky markets.

A new report from S&P Global Market Intelligence found that U.S. home insurers last year posted their worst year since 2011, posting a net combined ratio (or ratio of their total losses to the premiums they collected) of 110.5% (any value above 100% represents a net loss). That represents a total loss of more than $101 billion.

“Inflationary pressures, a devastating wildfire in Hawaii and a record number of billions of dollars in losses due to convective storms weighed on the industry’s results in 2023,” the report says.

High inflation has raised the cost of paying customer claims and made the reinsurance policies that companies buy to protect against losses more expensive. Additionally, a series of severe storms that caused massive property damage hit the industry: the wildfires in Hawaii in August 2023 alone, for example, cost insurance companies $61.5 billion.

As dangerous storms become more frequent and costly, market conditions are not improving for the $152 billion home insurance industry.

S&P found that only two of the nation’s 20 largest homeowners insurance providers (Chubb and America Mutual Insurance) made money on their home insurance lines last year. Losses across the board have forced insurers to raise rates, passing their costs onto consumers. Rising prices are the easiest lever insurance companies have to boost returns: Homeowners across the country have faced price increases of between 10% and 12% over the past year, far exceeding inflation.

In some markets, home insurers have stopped operating entirely, citing operating costs: In Florida, one of the most expensive markets in the country due to its exposure to Atlantic hurricanes, nine insurers closed or merged with competitors between 2021 and 2023. That lack of competition has only driven premiums higher. Other factors have included inflation, more frequent storms and elevated pricing trends in the reinsurance market. Insurers have been paying high rates for policies to protect them if they suffer huge losses in a single storm.

“Insurance premiums charged in the state of Florida have skyrocketed in recent years. Part of this is reinsurance costs,” said Charles Nyce, a Florida State University professor and insurance expert. Fortune. “Over the last few years, it’s been very expensive and some insurance companies can’t get it at any price.”

Last year’s hurricane season was relatively mild, boosting returns for businesses in Florida, one of its largest markets. But forecasters expect this hurricane season to be exceptionally costly.

“The 2024 Atlantic hurricane season is forecast to be well above the historical average number of tropical storms, hurricanes, major hurricanes and direct impacts on the United States,” AccuWeather senior hurricane forecaster Alex DaSilva wrote in a March forecast. “All signs point to a very active and potentially explosive Atlantic hurricane season in 2024.”

However, major hurricanes are far from the only threat. Recent deadly hail storms in Texas and Oklahoma and wildfire threats in the West underscore how more common hazards can also pose costly threats to insurance companies, and these types of weather events are becoming more common, putting pressure even more so to insurers.

“There is definitely a growing perception of the threat of climate risks,” said insurance industry analyst Steve Evans. Fortune.

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