Homeowners’ insurance industry should expect modest underwriting loss, says Fitch

By Zainab Iwayemi

Using losses from natural catastrophes and managing operations amid the global pandemic as a basis, Fitch Ratings, a global credit rating and research firm, has estimated that the homeowners’ insurance industry is poised to shift to a modest underwriting loss for the year 2020.

Fitch further estimates that in 2021, the segment is likely to witness underwriting gains as market fundamentals remain stable. In addition, it projected that pricing momentum is expected to support future performance barring another severe catastrophe season in 2021.

“The line should see underwriting and expense improvement in 2021, with performance continuing to hinge on catastrophe loss experience,” it said.

In 2020, catastrophe took a toll globally causing Broker Aon to estimates insured catastrophe losses in the United State doubled to $73 billion in 2020 from $36 billion a year earlier. However, Fitch reports shows that generally, carriers continue to achieve modest rate increases, with substantial increases in loss affected markets, while the overall capital levels for the industry remain very strong.

According to Fitch, homeowners’ catastrophe losses reported by eight publicly-traded insurers rose by 45 per cent in 2020, adding 24 points to the group’s segment loss ratio. However, the aggregate calendar year combined ratio was virtually unchanged at 92 per cent due largely to 4.5 points of favourable prior year reserve development in 2020.

“Ahead in the near term, homeowners’ insurers will be watching which changes in workplace and travel practices are more long-lasting and may affect property risk exposures,” Fitch said.

Importantly, the rating firm noted that larger underwriters tend to have an advantage in managing catastrophe exposures and gaining efficiency from technology investments