By Carolyn Cohn and Noor Zainab Hussain
LONDON (Reuters) – International and domestic insurers are pushing into the U.S. market for hard-to-protect homes, charging high premiums and enjoying strong profits after some U.S. companies pulled out.
Increasing losses from storms, hurricanes and wildfires in recent years have led some insurers, such as Allstate and State Farm, to scale back coverage in catastrophe-hit states like Florida and California.
This has left more room for foreign players such as Hiscox and Munich Re to enter the fray, industry sources say. Allstate did not respond to a request for comment, while State Farm declined to comment.
According to a report from Swiss Re this month, 2024 will be the fifth consecutive year in which global insured losses from natural disasters exceed $100 billion.
The recent major U.S. hurricanes Helene and Milton have increased concerns about property loss. However, the increasing frequency of extreme weather events has fueled the market for higher-priced surplus and redundant lines, or E&S.
Homeowner premiums have risen as much as 100% in recent years in areas like Los Angeles and southeast Florida, said Brian Bazan, vice president at broker Hub International.
It was not unusual for premiums to rise by 50% when policyholders switched from the admitted market, although increased competition was beginning to reduce these rate increases, he added.
Most properties in the United States are covered by so-called “authorized line insurance,” where premium rates must comply with state insurance regulators.
But policyholders, typically when denied by three approved line insurers, often purchase E&S policies to get the coverage they need.
This market has attracted players in the Lloyd’s of London specialist insurance market, which focuses on complex risks.
“Where the market (terms and conditions) hardens, it has to go outside the United States and Lloyd’s is often the beneficiary,” said Robert Greensted, managing director at S&P Global.
“The potential for profitability is obviously there, but there is additional risk.”
Lloyd’s had the largest share of the total E&S market in 2023. Recent growth in the E&S market has been driven by property insurance premiums from catastrophe-prone states, according to a report from ratings agency Fitch.
Tom King, flood risk underwriter at Lloyd’s insurer Hiscox, said the company’s E&S flood product could provide higher levels of reconstruction payments than conventional cover.
Munich Re was interested in expanding its long-standing E&S business, said Tom Wallace, chief underwriting officer for the binding authorities division at Munich Re Specialty-North America.
