US home insurers suffer biggest loss of century in 2023

U.S. home insurers suffered their biggest underwriting losses this century in 2023, according to credit rating agency AM Best, as a toxic combination of natural disasters, inflation and population growth in high-risk areas put acute pressure on a key financial market.

Insurers offering policies to homeowners suffered net underwriting losses of $15.2 billion last year, the highest since at least 2000 and more than double the losses suffered the year before, according to figures from credit rating agency AM Best.

The report identified population growth in areas most vulnerable to natural disasters as a major factor. According to Census figures, six extreme weather-prone states, including California, Texas and Washington, accounted for half of the nation’s population growth in the 2010s.

“A growing population means an even greater increase in real estate development and therefore in insured values,” said Christopher Graham, senior industry analyst at AM Best.

“Construction in disaster-prone areas increases the risk of flooding. It also increases the risk of wildfires in areas prone to them, from human activity and utilities, he added.”

AM Best expects that the segment will no longer be profitable in the short term.

The Financial Times was first to report the details of the AM Best report on Sunday.