Home Insurance Industry’s Worst Shock of the Century

Above, the gigantic Park fire in California is burning close to the same area, Paradise, that was famously destroyed 6 years ago in another disaster, the Camp fire. Residents have continued to build in areas vulnerable to increasing massive disasters.

Insurers taking a beating. We are all paying for this through increased rates already. Clearly this is unsustainable but something no one wants to talk about. Graph below is daunting.

Financial Times (paywall):

US home insurers last year suffered their worst underwriting loss this century as a toxic mix of natural disasters, inflation and population growth in at-risk areas put a vital financial market under acute pressure. Insurers providing policies to homeowners suffered a $15.2bn net underwriting loss last year, according to figures from rating agency AM Best, a figure it said was the worst since at least 2000 and more than double the previous year’s losses.

The figures lay bare the underwriting conditions that have sparked a pullback by US insurers from disaster-hit areas, either exiting markets or driving up prices, creating an affordability crisis for many homeowners. The report identified rising populations in those regions most susceptible to natural disasters as a significant factor — citing census figures showing that six states prone to severe weather, including California and Texas, accounted for half of the country’s population growth in the 2010s.

“The industry is facing rapidly escalating coverage demands while insured losses are skyrocketing,” said Robert Gordon, senior vice-president of policy, research and international at the American Property Casualty Insurance Association, a trade body.
“Not only are more homes being built in areas that are at high risk for natural disasters, but these homes are increasingly more expensive to repair and rebuild as inflation has driven up the cost of construction labour and materials.”