Homeowners in America’s riskier markets are losing coverage. It’s not just disaster risk, though. Inflation has made repair costs rise faster than premiums.
NEW YORK – Across the United States, insurance companies are reducing their exposure to homeowners property insurance in areas at risk of flood, storms and wildfires.
State Farm and Allstate recently pulled back from California’s homeowners’ insurance market, and AIG announced it would reduce coverage for affluent homeowners in ZIP Codes that face a high risk of flooding or wildfire.
Some homeowners in Florida may also be affected by AIG’s announcement, which follows earlier moves to reduce new exposure in California.
There isn’t just one cause of the nation’s insurance stress. Some people say that soaring rebuilding costs are to blame; others point to the influence of climate change; still others say it’s due to regulation.
In California, insurers claim regulatory pricing restrictions made it harder to recoup an inflation-driven surge in rebuilding costs amid rising wildfire losses.
According to the American Property Casualty Insurance Association, California homeowners’ insurance claims payouts doubled between 2019 and 2022, while premiums only increased by approximately 33%.
Insurance brokers say that homeowners’ coverage options are limited as more insurers pull out of riskier markets.
In a little-noticed pullback, Farmers Group earlier this year stopped offering new home-insurance policies in hurricane-prone Florida. “With catastrophe costs at historically high levels and reconstruction costs continuing to climb,” it will help Farmers more effectively manage risk exposure, a spokesperson said.
Source: Wall Street Journal (06/08/23) Eaglesham, Jean
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