A.M. Best Special Report: Homeowners Profitability Is an Ongoing Challenge

Despite the various strategies employed by companies that write the business, homeowners insurance historically has produced volatile underwriting performance, according to A.M. Best.

And while strategies to make homeowners insurance more profitable have intensified with advancements in technology over the past 10 years, through 2012 there have been only four years in the past 20 years that have produced combined ratios below 100, A.M. Best stated.

Those four years benefited from fewer catastrophe events, the beginning of some price firming and the initial stages of exposure management and control. From an underwriting perspective, since 1992 the combined ratio in the homeowners line has fluctuated from a low of 89.0 in 2006 to a high of 158.4 in 1992, according to A.M. Best.

Year-to-year fluctuations of 10 points or more have occurred 10 times in the past 20 years, according to the report.

Homeowners is one of the U.S. property/casualty segment’s leading product lines, representing roughly 15 percent of net premiums written as of year-end 2012. Generating operating profits in the face of growing competition and treacherous patterns of localized catastrophes always has been a concern in managing property books of business, A.M. Best stated.

Before Superstorm Sandy in 2012, and in the absence of a hurricane making landfall since 2008, writers with significant coastal exposure worked to develop books of property business farther inland. However, some companies that fled coastal hurricane risks experienced significant noncoastal catastrophe losses.

Despite volatile catastrophic activity over the past several years, there have been few rating actions related to single, severe catastrophes, A.M. Best said.

Topics Catastrophe Homeowners AM Best