US insurers’ profits double as price rises exceed extreme weather claims

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US property and casualty insurers nearly doubled their earnings between 2023 and last year despite costly extreme-weather events, according to research that highlights the pay-off from several years of rising customer prices.

A survey of companies that account for at least 97 per cent of US property and casualty cover by rating agency AM Best, found that the aggregate after-tax profits of the industry surged to $171bn last year, compared with $92bn the previous year.

Hurricanes, fires and other disasters caused an estimated $320bn of losses around the world in 2024, about a third more than the year before. In the US alone, five big hurricanes as well as other severe storms struck.

However, the data showed insurers more than offset larger losses by increasing premiums. Helen Andersen, an AM Best research analyst, told the Financial Times that the strong earnings figures were the result of “an aggressive push for significant rate and pricing increases” by insurers.

According to separate research by S&P Global Market Intelligence on US property and casualty insurers, the industry’s “combined ratio” — a measure of underwriting profits that looks at claims and costs as a percentage of premiums — was the best since 2013.

The sector’s combined ratio fell to 96.5 per cent last year, from 101.6 per cent the previous year. Anything under 100 per cent represents an underwriting profit.

According to S&P, insurers booked their first aggregate underwriting profit on home insurance since 2019.

Although the industry tends to cut the cost of cover after a period of rising prices, several large US insurers reassured shareholders on first-quarter investor calls that they were unlikely to enter an aggressive price-cutting cycle.

Tom Wilson, chief executive of Allstate, told analysts in a May earnings call that the company saw the opportunity for further rate increases in New York and New Jersey. He added that fallout from any US tariffs could keep consumer prices higher for longer.

Higher tariffs on car parts or home building materials, for example, would increase the cost of claims for insurers, feeding through to prices.

But some consumers — particularly in states historically less affected by wildfires and extreme weather such as hurricanes — have questioned the justification for price rises that have sometimes outstripped inflation.

Daniel Biehl, a homeowner in Minnesota, told the Financial Times that his insurer wanted to increase the cost of his annual policy this year from $1,958 to $3,793.

He shopped around and found a different insurer but reports that his broker told him that many local clients were being asked to pay higher prices at renewal, partly because of rising labour and material costs.

“I’m worried that my new provider will follow suit in the near future, and insurance will have to be a much bigger cost to my family’s budget,” he said, adding, “I understand that they have rising costs, but such a drastic per cent increase just seems completely out of line.”