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Rising Homeowners Losses Hurt P/C Insurers in 2017

Fitch Ratings Reports: June 18, 2018

Personal lines underwriting losses rose in 2017 for the fourth year in a row, Fitch Ratings found in a new report. There’s a twist, however.

In the three years prior to 2017, personal automobile insurance contributed largely to underwriting losses. It is showing some improvement now, but homeowners insurance is now a major loss ingredient for the sector.

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“The homeowners’ line is traditionally a more volatile product segment, which experienced a higher combined ratio than personal auto for the first time since 2012,” said Managing Director James Auden.

According to Fitch, industry statutory personal lines combined ratios rose to 103.8 in 2017, even as written premiums continued to grow. Higher catastrophe losses are largely to blame for the losses, while growing auto insurance losses were the cause in the previous three years.

Other findings from the Fitch report:

  • While personal automobile insurance still generated big underwriting losses in 2017, there were improvements, thanks to price increases in recent renewals. Fitch tracked a combined ratio of 102.6 for 2017, down almost four points for the year.

  • The combined ratio for homeowners insurance rose to 107 for 2017, due to higher catastrophe losses. From 2013 to 2016, the average combined ratios were around 92.

  • Personal auto grew the fastest among personal lines segments over the last two years, generating more than 7 percent in net written premium growth. Fitch sees that continuing in 2018 because of price increases.

  • Homeowners insurance, on the other hand, dipped over the previous three years and was only 2 percent in 2017. Fitch sees a quicker expansion in 2018.

For 2018, Fitch expects auto insurance to get close to a 100 combined ratio and homeowners to improve, assuming there are no large catastrophe losses as in 2017.

Fitch said its sector outlook for the U.S. personal lines sector remains negative, though the rating outlook for most personal lines writers is stable.

Source: Fitch Ratings

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