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Rising losses from natural disasters see some insurers cut cover in catastrophe-hit states

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Homeowner premiums have soared, 50% rise not uncommon, broker says

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Lloyd's of London insurance market has stepped in, has biggest market share

(Adds comment from Allstate in paragraphs 4-5, updates dateline)

By Carolyn Cohn and Noor Zainab Hussain

LONDON, Dec 17 (Reuters) - International and domestic insurers are pushing into the U.S.

market for hard-to-protect homes, charging high premiums and enjoying strong profits after some

U.S. firms pulled out.

Rising losses from storms, hurricanes and wildfires in recent years have caused some

insurers, such as Allstate and State Farm, to cut back cover in catastrophe-hit states like

Florida and California.

This has left greater room for non-domestic players like Hiscox ( HCXLF ) and Munich Re

to enter the fray, industry sources say.

"We continue to provide home insurance to most existing customers in these states but are

not currently offering home insurance to new customers," Allstate said in an emailed statement

to Reuters.

The company is offering auto insurance to both new and existing customers in both states, it

added.

State Farm declined to comment.

According to a report this month from Swiss Re, 2024 will be the fifth consecutive year that

global insured losses from natural catastrophes exceed $100 billion.

Recent large U.S. hurricanes Helene and Milton have added to concern about property losses.

However, the increasing regularity of extreme weather events has stoked the market for more

expensive excess and surplus lines, or E&S.

Homeowners' premiums have risen by as much as 100% in the past couple of years in areas such

as Los Angeles and the southeast of Florida, said Brian Bazan, a vice president at broker Hub

International.

It was not unusual for premiums to rise 50% when policyholders transferred from the admitted

market, though increased competition was starting to bring those rate increases down, he added.

Most properties in the U.S. are covered via so-called admitted line insurance, where premium

rates have to satisfy the state insurance regulator.

But policyholders, typically when they have been refused by three admitted line insurers,

often buy E&S policies to gain the cover they need.

This market has attracted players in the specialist Lloyd's of London insurance

market, which focuses on complex risks.

"Where the market (terms and conditions) hardens, it has to go outside of the States and

Lloyd's is often the beneficiary," said Robert Greensted, a director at S&P Global.

"The potential for profitability is obviously there, but there is additional risk."

Lloyd's had the biggest share of the overall E&S market in 2023. Recent growth in the E&S

market has been driven by property insurance premiums from catastrophe-prone states, according

to a report by ratings agency Fitch.

Tom King, flood line underwriter at Lloyd's insurer Hiscox ( HCXLF ), said the firm's E&S flood

product could provide higher levels of rebuilding payments than conventional cover.

Munich Re was interested in growing its long-standing E&S business, said Tom Wallace, chief

underwriting officer for the binding authorities business at Munich Re Specialty-North America.

"The industry is seeing the first real dislocation on the admitted front, particularly in

California," he said.

States which have seen the biggest growth in E&S property business since 2018 are those

facing the most risk - California, Florida and Louisiana, according to the U.S. Insurance

Information Institute.

U.S. E&S homeowner premiums are likely to exceed $3 billion in 2024, up from $1.2 billion in

2018, according to reinsurance broker Guy Carpenter. A rise in premium volume reflects both

increased demand and higher premium rates.

The overall combined ratio - a key measure of underwriting profitability in which a level

below 100% indicates a profit - was 66% for property E&S business last year, sharply higher than

93% in 2022, the Fitch report said.

U.S. insurers are also present in this market - sometimes the same ones that pulled out of

admitted lines.

"The Lloyd's markets have always been here, but the U.S. high net worth markets are now

building out their own E&S operations," said Hub International's Bazan.

"They are seeing more demand as they pull out of admitted and backfill it with E&S. They can

do what Lloyd's has always done, which is crafting unique solutions."

Nationwide and AIG are among major U.S. insurers to offer E&S as well as admitted property

cover.

Nationwide did not respond to a request for comment, while AIG declined to comment.

(Additional reporting by Pritam Biswas; Editing by Kirsten Donovan and Alan Barona)