U.S. homeowners premiums increased from $74 billion in 2011 to $89 billion in 2015, and will rise to a projected $91 billion for 2016 given prospective rate activity.
Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc launched its annual Homeowners ROE Outlook report, which forecasts continued growth in direct U.S. homeowners insurance premiums for 2016 despite a decreasing return on equity for insurers.
The report reveals that The study shows that homeowners insurers secured an average rate increase of 2.0 percent during the 18 months to August 2016, with rate decreases experienced in the states of Florida, Arizona, Indiana, Ohio, Alabama, and Alaska.
The prospective after-tax return-on-equity (ROE) for U.S. homeowners business was shown to be 6.7 percent on a countrywide average (2015: 8.6 percent), and 10.9 percent excluding the state of Florida (2015: 12.6 percent). ROEs are expected to exceed 10 percent in 34 US states – enabling carriers to cover their cost of capital – compared to 36 states in 2015.
The report highlights that a continued decrease in reinsurance pricing has offered insurers the opportunity to more extensively utilize traditional and non-traditional reinsurance in their capital strategies and pursue growth opportunities in this highly competitive sector.
However, the negative effects of lower investment yields, higher expenses, and an increase in the catastrophe loss ratio resulting from updates to vendor catastrophe models, are causing insurers to place a greater emphasis on underwriting performance and the development of effective strategies in pricing, claims management, marketing and risk selection.
“Our study reveals that at prospective 2017 rates, homeowners insurance provides accretive returns in the majority of states, and opportunities exist for insurers to pursue profitable growth in the line,” said Greg Heerde, head of Americas Analytics for Aon Benfield.
Developed by Aon Benfield Analytics and updated annually, the Homeowners ROE Outlook report provides a comprehensive analysis of the U.S. homeowners insurance sector, based on industry aggregate state level statutory financial filing information along with rate filings and supporting actuarial information for the 20 top U.S. homeowners insurance groups by state.
To view the 2016 Homeowners ROE Outlook report, paste the following link into a web browser: http://aon.io/2epnz2k
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