International Insurers Push into US Market for Hard-to-Insure Real Estate

The US insurance market is currently undergoing a remarkable transformation: international and national insurers are increasing their commitment to areas that are difficult to insure, benefiting from high premiums and substantial profits. This is due to the withdrawal of some large US companies like Allstate and State Farm from states affected by natural disasters, such as Florida and California. This development opens up new opportunities, especially for international players like Hiscox and Munich Re. They are entering the market and filling the gaps left by the withdrawal of domestic insurers. This continues a trend, which according to a report by Swiss Re, has resulted in global insured losses from natural disasters exceeding 100 billion US dollars for five consecutive years. Severe hurricanes like Helene and Milton have heightened concerns about property losses. However, the frequency of extreme weather events is fueling the business with expensive Excess-and-Surplus (E&S) lines. In areas like Los Angeles and southeastern Florida, premiums have risen by up to 100 percent in recent years, reports Brian Bazan of Hub International. While most US properties are covered by so-called admitted-line insurance, many policyholders resort to E&S policies after three rejections, which do not require state-approved rates. This area is served, among others, by the specialty insurance market Lloyd's of London, which targets complex risks. Robert Greensted of S&P Global points out that in a strained market like this, Lloyd's benefits particularly, even if additional risks exist. Currently, Lloyd's holds the largest share of the E&S market, driven by premium revenues from catastrophe-prone US states. Hiscox, with its E&S flood insurance, offers higher building reconstruction payouts than conventional policies. Furthermore, Munich Re sees great potential in further expanding its long-standing E&S business in North America, according to Tom Wallace of Munich Re Specialty-North America.