NU Online News Service, Jan. 18, 1:02 p.m. EDT
Plans by United Services Automobile Association to raise homeowners-insurance rates in Texas for the third time in the past 12 months, combined with similar rate increases by other insurers, boost the prospects of carriers in the state keeping pace with projected elevated claim costs, according to Moody's Investors Service.
In its Weekly Credit Outlook, Moody's says USAA announced its plans for a rate increase on Jan. 6, and adds that the company's three increases over the past year total 15.2 percent.
"As homeowners insurance rates increased nationally, price increases for Texas homeowners in 2011 were among the highest in the nation, reflecting significant underwriting losses," Moody's says.
The ratings agency says high-frequency, low-severity weather events such as hail storms, tornadoes and wildfires have driven the need for rate increases inTexas. And since Texas is the third-larges homeowners-insurance market in the country, Moody's says large rate increases can impact premium volume for national personal-lines carriers and help improve profitability.
"Weak profitability is an issue not only for Texas but for the entire country," explains Moody's. "Over the past 10 years, homeowners insurers' profitability across theU.S.has been a minus-2 percent return on earned premiums, and we expect 2011 to produce substantial losses."
The uptick in the volatility of high-frequency, lower-severity weather events compounds insurers' profitability issues, Moody's says, but rate increases in Texas and around the country will help insurers manage the challenges.
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