PROPERTY INSURANCE REPORT the Authority on Insuring Homes and Commercial Property
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Reprinted With Permission Of The Publisher PROPERTY INSURANCE REPORT The Authority on Insuring Homes and Commercial Property Vol. 26#11/611 Nov. 11, 2019 Florida Dodges Dorian As Other INSIDE Challenges Continue to Howl Many of the home insurers who have left Florida averted a disaster this summer when the path of the market sought greener pastures. Page 2 Hurricane Dorian shifted, but storm clouds continue to hov- er over the state’s homeowners insurance market. Respond- Table: Homeowners insurance groups in ing to rising costs on claims from past hurricanes, higher 1971, with 2018 status. Page 3 reinsurance prices and litigation trends, carriers are raising Research seems clear: a big storm in rates and tightening underwriting Florida will take down a number of insur- Even as legislative reforms that took effect July 1 are ers. Page 6 expected to dramatically reduce lawsuits filed in conjunction with an assignment of benefits, insurers fear unrestrained Rising reinsurance prices squeeze prop- first-party litigation will continue to drive up claims costs. erty specialists in Florida. Page 7 And if that’s not enough, judging by the political at- tention to complaints after Hurricane Michael, insurers are THE GRAPEVINE likely to face legislation governing claims handling practic- Property Insurance Report es. Last week, Florida CFO Jimmy Patronis, who oversees Conference Underway In insurance regulation, said he would pursue legislation in Southern California the next session aimed at “reducing the number of claims For those of you attending the Please see FLORIDA on Page 5 2019 Property Insurance Report National Conference this week, Only the Strong Can Survive: welcome to California. We know you’ll have a great experience. Just 14 of Top 40 Home Insurers For everyone else, we’re busily In 1971 Are Still Writing Today exploring the future of property Everyone believes property insurance is a tough busi- insurance with 230 industry leaders ness, where one big wrong move can kill a business over- representing virtually every active night, or a series of small bad moves can lead to a slow cor- and innovative home insurer and porate death. Now we have proof. Thanks to the researchers every important provider of data at A.M. Best Co., we have a market share table for home- and services, so rest assured that owners insurance writers in 1971, the furthest back they can we will soon have plenty to report reach. And with a lot of research, we have identified what in these pages. PIR has happened to every one of the 40 largest writers. The bottom line? Only the strong survive, with 14 homeowners writers in 1971 still active today, and 26 whose home- owners business (and sometimes the entire business) have gone to live with the big actuary in the sky. Tellingly, it was Hurricane Hugo in 1988 and Hurricane Andrew in 1992 that really separated the strong from the Please see ONLY THE STRONG on Page 2 33765 Magellan Isle • Dana Point, CA • 92629 • (949) 443-0330 • www.riskinformation.com Reprinted With Permission Of The Publisher Page 2 PROPERTY INSURANCE REPORT November 11, 2019 ONLY THE STRONG Continued from Page 1 owners insurance business in the 1990s and is weak. Of the 26 top-40 home insurers that have only a broker today. exited the market since 1971, the first came in These challenges didn’t keep State Farm 1985, and that was the only one in that decade. Mutual from flourishing over time in property Then 13 big home insurers left the market in the insurance, more than doubling its homeown- 1990s, when the going really got tough. Six more ers insurance market share in the last 47 years. companies disappeared from 2000 to 2010, and Though Allstate, a public company very focused four have exited since 2011. A number of these on its stock price, may have been pulling back in insurers left personal lines to focus on commer- recent years, its homeowners business is bigger cial, while others left property and casualty to today than it was in 1971. Andover and West- focus on life, health and/or investments. field may have a smaller national market share Some died completely, such as General Ac- today than in 1971, but their relatively small size cident and Commercial Union, which merged and geographic concentration have been no bar- into CGU, then sold to White Mountains, rier to long-term success. And their national mar- which sold the remnants of the business to One ket share is smaller largely due to the dramatic Beacon, which sold to Tower, which failed with price increases in catastrophe-prone markets, pieces going to AmTrust. There is no discern- where they are largely absent. If clever Geico is still worried, Progressive, which was a modest Most of the departed insur- auto insurer in 1971 and wouldn’t think about ers are gone because they were selling homeowners for decades, has flourished not good at selling insurance. in property in recent years. There is only one characteristic all these de- ible part of those original businesses still alive in parted insurers have in common: they were not the market today. good property insurance companies. A lack of Reading through the tortured corporate his- leadership, which manifested itself in a lack of tories of the departed home insurers, there are performance, drove all these companies away. many rationalizations for why their management We can’t find a more decisive factor: not size, decided to abandon one of the largest and fast- not geography, not distribution, not corporate est-growing products in the insurance industry. structure. Aetna left property and casualty be- Some feared the general volatility. Some cause it wasn’t good at it, and management felt they were too small and geographically thought health would be easier. (Surprise! Not concentrated. Some thought independent agents true.) The Continental failed in all aspects of couldn’t handle the work. Some decried regula- being a property and casualty insurance com- tors. Some said it wasn’t a business for public pany, as did the Home, Fireman’s Fund, the companies. (Most of the dear departed were pub- Royal, General Accident, Commercial Union, lic.) Some mutuals worried that without access Transamerica, Reliance and others. to the public markets, they would not be able to The survivors are a different breed. They compete in the capital-intensive homeowners learned how to incorporate the astonishing flow business. We’re still puzzled by the fear that of data that has fueled the industry in the past Warren Buffett and Berkshire Hathaway have three decades. They learned to efficiently use for homeowners insurance, owning as he does reinsurance, and/or manage their own capital, one of the world’s leading catastrophe reinsur- to deal with the market’s wild volatility. They ance companies. Spooked by Hurricane Andrew, have embraced modern underwriting, including Berkshire’s Geico walked away from the home- Please see ONLY THE STRONG on Page 10 Warning: Property Insurance Report is a confidential, copyrighted newsletter for subscribers only. No part of this publication may be reproduced by any form or means, including photocopying, scan- ning, fax or email, without prior permission of the Publisher. For information call (949) 443-0330. Reprinted With Permission Of The Publisher November 11, 2019 PROPERTY INSURANCE REPORT Page 3 Homeowners Insurance Groups Market Share 1971-2018 Ranked by 1971 Market Share 1971 1971 Group Market Share 2018 Market Share, Rank or Corporate Change 1) State Farm Mutual 8.0% 18.4%, ranked #1 2) Allstate Insurance 7.0% 8.4%, ranked #2 3) Aetna Life & Casualty 4.0% P&C unit sold to Travelers for $4.4B in 1996 4) Travelers Insurance 3.7% 3.8%, ranked #6 5) Continental Corp. 3.6% Sold to CNA for $1.1B in 1994 6) Hartford Insurance 3.3% 1.0%, ranked #16 7) Home Insurance 2.6% Sold to TVH Acquisition Corp. in 1991 8) INA Corp. (later Cigna) 2.3% Cigna sold P&C to Ace for $3.45B in 1999 9) Safeco Insurance 2.0% Sold to Liberty Mutual for $6.2B in 2008 10) Nationwide Corp 1.9% 3.2%, ranked #8 11) Farmers Insurance 1.8% 5.9%, ranked #5 12) Fireman’s Fund 1.5% Sold personal lines to ACE for $365M in 2014 13) Republic Financial Svcs 1.5% Sold to Amtrust for $233M in 2016; now 0.1%, ranked #108 14) CT General (later Cigna) 1.5% Cigna sold P&C to Ace for $3.45B in 1999 15) Royal Insurance 1.5% UK’s RSA Group departed US in 2007 16) Ohio Casualty 1.4% Sold to Liberty Mutual in 2007 17) American Financial Group 1.4% Exited personal lines starting in the 1990s 18) General Acc (later CGU) 1.4% CGU sold to White Mountains in 2000; ultimately to Amtrust 19) Crum and Forster 1.3% Sold to Xerox in 1982, Fairfax Fin. in 1998, now ranked #222 20) Comm Union (later CGU) 1.3% CGU sold to White Mountains in 2000; ultimately to Amtrust 21) Liberty Mutual 1.2% 6.7%, ranked #3 22) Transamerica Insurance 1.1% Spin-off TIG sold homeowners to Nationwide in 1993 23) Lincoln National 1.1% P&C Sold to Safeco for $2.8B in 1997 24) American General 1.1% Sold to AIG for $23B in 2001 25) America Grp/Hanover 1.0% 0.6%, ranked 26th; once known as Allmerica 26) Andover Insurance 1.0% 0.3%, ranked 42nd 27) USF&G 1.0% Sold to St. Paul for $3.5B in 1998 28) Chubb Group 1.0% 2.9%, ranked 9th; acquired by Ace for $28.3B in 2016 29) St.