AM Best reports that US residual property insurance markets nearly doubled their policy count over the past five years - 2018 to 2023 - with personal lines posting growth at double-digit rates amid escalating weather-related issues.
The Best's Special Report pointed to how an increase in claim costs had led admitted market insurers to reassess their property exposure risk appetites, especially in states prone to catastrophes.
“FAIR Plan policies may cost more than private insurance in the voluntary market and may offer less coverage, but they do offer policyholders insurance protection where none would exist otherwise,” said David Blades, associate director at AM Best.
The report identified Citizens Property Insurance Corporation of Florida as the top player in residual markets with 68.7% of direct premiums written and 52.7% of all FAIR Plan policies, nationwide. The corporation specializes in residential coverage, comprising 99.1% of Florida's FAIR Plan policies.
As things stand now, the FAIR plans are currently open to 33 states plus D.C., and seven Atlantic and Gulf states maintain specialized Beach and Windstorm Plans – namely Alabama, Florida, Mississippi, New York, North Carolina, South Carolina, and Texas. In recent years, the underwriting performance of homeowners’ business written through the FAIR Plans declined to a combined ratio of 110.9 for 2023, increasing from 104.5 in 2022.
Meanwhile, FAIR Plans in Georgia, Louisiana, and Florida recorded policy growth of well above 200% due to the susceptibility of the region to climate-change risks and rising insured loss totals.
This explosive growth in residual market participation signifies a critical shift in property insurance accessibility especially for those regions facing climate-related risks, the report stated.
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