(Reuters) – U.S. home insurers will suffer their worst underwriting loss this century in 2023, ratings agency A.M. Best said on Monday, as a toxic mix of natural disasters, inflation and population growth in vulnerable areas put a vital financial market under severe strain.
Homeowners insurance companies suffered a net loss of $15.2 billion last year, according to figures from credit rating agency AM Best, which said the figure was the worst since at least 2000 and more than double the losses from the previous year.
The report identified population growth in areas most vulnerable to natural disasters as a major factor — citing census figures showing that six states prone to extreme weather, including California, Texas and Washington, accounted for half of the country’s population growth in the first decade of the 21st century.
“Population growth means higher property development and therefore higher insured values,” said Christopher Graham, chief industry analyst at AM Best.
“Building in disaster-prone areas increases the risk of flooding. It also increases the risk of wildfires in disaster-prone areas due to human activity, as well as utility companies,” he added.
AM Best said it believes a return to underwriting profitability for the sector in the near term is unlikely.
The Financial Times first reported details of AM Best’s report on Sunday.