Premiums paid for US homeowners’ insurance is expected to breach the $90 billion mark in 2016, according to data from
Aon Benfield. However, the company noted that as premiums rise, return on equity (ROE) is decreasing.
Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc. The data is part of its recently released
Homeowners ROE Outlook report.
According to the report, US homeowners premiums have been on a growth trajectory since 2011, when premiums reached $89 billion in 2015 from the $74 billion total in 2011. The total is expected to reach $91 billion this year, as the study showed that homeowners’ insurers grew at a 2% average rate during the 18 months leading to August 2016.
Meanwhile, projected after-tax ROEs for this business line is expected to average 6.7% across the US, a decrease compared to the 2015 8.6% average. Still, ROEs are expected to surpass 10% in 34 states, which will allow carriers to cover their cost of capital, but this is still down trend compared to the 36 states that exceeded 10% ROE in 2015.
“Our study reveals that at prospective 2017 rates, homeowners insurance provides accretive returns in the majority of states, and opportunities exist for insurers to pursue profitable growth in the line,” explained Greg Heerde, head of Americas analytics for Aon Benfield.
The report also noted that the decrease in reinsurance pricing has opened opportunities for insurers to expand their use of traditional and non-traditional reinsurance in their capital strategies.
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