Farmers has ceased offering homeowners policies in Florida, pointing to historically high catastrophe costs and escalating reconstruction expenses. The combination of rising housing prices, increased lumber prices, and higher labor costs has significantly driven up the costs of claims, reducing profitability. Last year, six insurers in Florida were placed into receivership due to insolvencies, and in February, United Property & Casualty, which wrote about 135,000 policies in Florida, was forced into insolvency, largely due to losses from Hurricane Ian.
The property-casualty insurance industry is facing unprecedented challenges, described as the hardest market cycle in a generation. The combined pressures of economic inflation, legal system abuse, supply chain constraints, increasing catastrophic weather events, and historic cost increases for reinsurance are driving up losses and reducing capacity. Karen Collins, APCIA vice president for property and environmental, noted that these factors have created a perfect storm, resulting in significant deterioration in personal and commercial property lines.
According to the “2023 U.S. Property Market Outlook” by RPS, insureds in some markets are seeing premium increases exceeding 50%. The reinsurance renewal period at the beginning of the year had a major impact, with average reinsurance cost increases of 30% to 80%. Wes Robinson, national property president at RPS, emphasized the importance of early risk placement strategy discussions, as renewals are becoming more complex.
For personal auto insurance, inflation is driving up loss costs, and carriers are increasing rates and tightening underwriting guidelines. According to AM Best, the U.S. personal auto insurance market outlook was revised from stable to negative in September 2022 due to significant deterioration in carrier results. The annual cost of vehicle ownership has now surpassed $10,000, driven by rising fuel, vehicle parts, and maintenance costs. Theresa Breunig-Silbernagel from Main Street America Insurance noted that inflation and economic pressures are increasing the severity and cost of repairs and replacement vehicles, with no turnaround expected soon.
In summary, the insurance industry’s current landscape is marked by significant pullbacks from key markets, driven by economic, environmental, and regulatory pressures. As insurers adjust to these challenges, both agents and insureds must navigate a rapidly changing and increasingly difficult market.
