At least five large US property insurers have told regulators that extreme weather patterns have led them to stop providing cover in some regions, exclude various weather events or raise premiums and deductibles, the Washington Post has reported.
Responses to a National Association of Insurance Commissioners (NAIC) voluntary survey show some major insurers say they will cut out damage caused by hurricanes, wind and hail from policies covering property along coastlines and in wildfire-prone areas.
The survey was distributed last year by 15 states and received responses from companies covering 80% of the country’s insurance market.
Insurance providers are also more willing to drop existing policies in some areas as they become more vulnerable to natural disasters, the article says.
Among responses published on the NAIC website, Nationwide says “underwriting guidelines have been put in place prohibiting writing properties within a certain distance to the coastline to mitigate against hurricane risk”.
“More targeted hurricane risk mitigation actions are being finalised and will start by year-end 2023,” it says.
Allstate says its processes for managing climate-related risks include limiting new business for personal lines auto and property insurance in areas most exposed to hurricanes and implementing tropical cyclone and/or wind/hail deductibles or exclusions where appropriate.
It also highlights that it purchases multi-year reinsurance protection as well as aggregate cover and has partnered with federal and state governments for over 25 years to create programs to provide protection for insureds most geographically exposed to climate change.
The article points to increasing natural disaster impacts and pressures on insurers, and cites Daniel Schwarcz, who studies insurance markets at the University of Minnesota Law School as saying rate increases for homeowners insurance are regulated by state agencies and that can prevent firms from pricing policies that accurately reflect risk.
Insurance Information Institute Chief Communications Officer Michael Barry told insuranceNEWS.com.au that the Washington Post article accurately explains why some US property insurers are reducing their market share in disaster-prone states.
“Yet any changes to what their property insurance policies currently cover would need to win state-level regulatory approval before being implemented,” he said.
The US Senate Committee on Banking Housing and Urban Affairs last week held a hearing on “Perspectives on challenges in the property insurance market and the impact on consumers”.
The American Property Casualty Insurance Association (APCIA) and Reinsurance Association of America told the committee that the profitability of the property casualty insurance industry has been “extremely low” and has worsened recently.
“With natural disaster losses rising and millions of people increasingly at-risk, the cost of insurance is going up in many areas of the country and some insurers are having to rebalance their risk and reduce their exposure as a result of continuing natural disaster losses,” APCIA’s senior vice president of federal government relations Nat Wienecke said in a statement released in conjunction with the hearing.