The Zebra Newsroom

[UPDATE] Insurers scale back in risky states in response to significant Q3 losses

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Due to extreme weather conditions this summer in addition to the ongoing supply chain and labor shortage, insurance carriers are seeing significant CAT losses this quarter and are looking for ways to cut costs. 

According to Aon, severe weather insured losses for this year jumped above $20 billion by the end of October. As insurers report their combined losses and continue to adapt to the volatility of the market, some carriers are pulling out of risky states to stay afloat.

Allstate 

After reducing its footprint in the market for years, Allstate recently reported that it would be expanding homeowners coverage in California. This means the carrier would take on new homeowners coverage customers for the first time in over a decade. 

Carriers with a large presence in California suffered CAT losses due to the wildfires and many pulled out of the state this year. In fact, the state’s insurance commissioner had to prohibit insurance companies from dropping nearly 210,000 homeowners in areas affected by wildfires this year.

Allstate used to be in the top five biggest providers of homeowners coverage in the state back in 2005, and the carrier plans to help alleviate the homeowner’s insurance availability crisis with this comeback. The company recently received rate hike approvals in 12 states and plans to file for increases in 20 more states into 2022.  

Hippo 

Hippo announced that it would be expanding its presence in states other than California and Texas, with the intent to diversify its reach and lower the volatility it’s seen in recent quarters. The insurer will continue to write business in these states but are looking for ways to diversify its CAT exposure away from things that often happen in these two states. In addition, the carrier was recently approved for a 24% rate hike in California.


Chubb 

Despite having a better third quarter than expected, Chubb announced that it would be scaling back from the homeowner’s insurance market in California due to wildfire exposure. Chubb generates about 80% of its annual personal lines premiums from homeowners insurance; the carrier reported that it will pull coverage across the Golden State because it “cannot charge an adequate price for the risk.” 

About 2 million of the 4.5 million homes nationwide that have been identified as at high or extreme levels of wildfire exposure are located in California, and more than 7,000 fires have burned about 2 million acres across the state so far in 2021. 

The Hanover 

The Hanover Insurance Group announced that it would be withdrawing from Florida entirely after sustaining losses from Hurricane Ida and is monitoring exposure in other Gulf states. The carrier also pulled back its presence on states exposed to wildfires on the west and east coasts, stating that the changing weather patterns have been an issue across the industry in addition to the supply chain bottleneck. 

Progressive 

In response to the plunge in Q3 profits, Progressive reported that it would be changing its underwriting roles to reduce exposure and include targeted nonrenewals for its homeowners’ policy division in hurricane-prone regions and states with high CAT losses. In addition, the carrier plans to appoint more agents in non-volatile states and plans to increase rates across its product lines. 

Progressive has been more exposed to hurricane-prone states this year after it bought a controlling stake in Florida-based home insurance provider ARX, now known as Progressive Home.

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Jasmine Kim
Jasmine KimB2B Content Manager

Jasmine is The Zebra’s newsroom content writer. With a background in journalism, she reports on breaking news, trends, mergers and acquisitions, and financial reports related to the insurance industry.