US property insurance premiums fall for first time since 2017

U.S. property insurance premiums are falling for the first time in nearly seven years as insurers return to profitability thanks to lower catastrophe losses.

The average U.S. property insurance rate fell 0.94% in the second quarter from a year earlier, after several periods of slowing increases over the past year, according to a real estate market report from Aon Plc. It was the first time rates had fallen since the third quarter of 2017.

“We, and our clients, are excited that rates are finally coming down,” Vincent Flood, Aon’s U.S. property practice leader, said in an interview. “Clients were definitely rate weary.”

U.S. insurers’ profitability has been weighed on by more frequent losses in recent years, pushing rates up more than 30% in the third quarter of 2020. Rising interest rates then put further pressure on the sector as investors exited the reinsurance market in search of alternative investments, Flood said.

Last year, lower catastrophe losses helped insurers return to profitability, allowing them to invest more capital in their non-life insurance businesses, ramp up growth ambitions and pursue aggressive pricing strategies.

Flood said the rate cut is expected to continue into the current quarter and could continue if disaster losses remain low in the final months of the year.

“If there was a significant event, I would see the market stabilize again,” he said. “But if that doesn’t happen, I think we’ll see rates come down in 2025.”

Top photo: Homes in the Toll Brothers Inc. Bowes Creek Country Club neighborhood in this aerial photo taken over Elgin, Illinois, U.S., on Wednesday, September 26, 2018. Photographer: Daniel Acker/Bloomberg.

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