US Home Insurers Hit with Worst Underwriting Loss of the Century

The insurance industry isn’t weathering climate change so well. 

The US homeowners insurance segment took a $15.2 billion net underwriting loss last year, the worst loss this century and more than double 2022’s loss, according to a report by ratings agency AM Best.

Premium Cuts

It’s no secret that extreme climate events are getting more and more frequent. According to the federal NOAA National Centers for Environmental Information, there were 28 weather and climate disasters in the United States in 2023, which broke the previous record of 22 in 2020 and left $92.9 billion in damages. At risk of hurricanes are southeastern states like Florida and at risk of wildfires are western states like California.

It’s also no secret that many reasonable people think living in a warm, year-round sunshine climate is better than wearing layers of L.L. Bean to shovel your New England driveway for three months of every year. US population growth confirms as much, but also underscores the stress being put on home insurers:

• “The US population overall grew 7.4% between 2010-2020 but rose 10.2% in the South and 9.2% in the West during the period,” said David Blades, AM Best’s associate director of Industry Research and Analytics. “Population trends show residents increasingly moving toward regions that are more prone to hurricanes, severe convective storms or even wildfires.”
• The so-called combined ratio of insurers writing homeowner’s insurance in New England from 2013 to 2023 was 79.3, while in the South Atlantic and Southern regions, which include the Gulf Coast states, it was 92. The break-even threshold of this ratio is 100 — going over means insurers are paying more money in claims than they are receiving from premiums — and last year 17 states went over.

Florexit: Many firms have given up. According to the National Association of State Credit Union Providers, Florida lost over 30 insurance providers from 2020 to 2023 due to insolvency, changes to their risk appetite, or quitting the state. Insurers have fled California, too, while big names like State Farm, Farmers, and Allstate have cut back on issuing new policies.