Homeowners insurers, after a mediocre performance during the past five years, can likely look forward to a series of challenges over the next few years from regulators and natural catastrophes, a research consulting firm said in a report.
The forecast came from Conning Research and Consulting of Hartford, Conn. which said that while the period 2003-2007 was very favorable, with an improvement for the homeowners insurance line, returns relative to risk still do not compare favorably with other major lines.
In addition, in looking ahead, "the uneasy state of the U.S. economy creates a series of challenges for homeowners insurers over the next several quarters and likely the next few years," said a statement from Alan Dobbins, analyst at Conning.
Conditions in the housing market will suppress growth as long as inventories remain at elevated levels and as values decline, according to Conning.
Insurance-to-value will be adversely affected, and the threat of inflation could increase the cost of the average homeowners claim in the wake of declining premiums, the analysis added.
Home insurers also cannot expect continuing light catastrophe activity, and along with greater loss frequency, "a worsening severity picture is also in store, as the value at risk, particularly in wind-exposed locations, is increasing," Conning said.
It noted population growth continues in coastal locations, along with an increase in property values, creating the ideal conditions for a mega-catastrophe."
Conning's analysis also found that regulatory influences will be a constraint to profitable growth for the next several years.
The Conning Research study, "The Homeowners Insurance Market: The Eye of the Storm," analyzes the economic and regulatory pressures on the line, as well as issues related to catastrophe management and distribution changes "that will have profound effects on homeowners insurance in the coming years," the firm said.
Stephan Christiansen, director of research at Conning, said, "With the increased pressures on the homeowners insurance line associated with both the economy and regulatory issues, it is clear that insurers will need to manage carefully through the next few years."
He said Conning research indicates that those insurers who have innovated in technology, and are willing to innovate in policy simplification and more sophisticated pricing approaches, will be at a significant advantage in this challenging environment.
"The Homeowners Insurance Market: The Eye of the Storm" can be purchased for $1,750 by calling (888) 707-1177 or through the company?s Web site at www.conningresearch.com .
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.