The U.S. home insurance market has experienced its worst underwriting results since at least 2000, with population shifts to areas increasingly vulnerable to weather-related events playing a significant role, according to a new report from AM Best.

The report, “Migration to Areas at Risk from Natural Disasters Increases Volatility for U.S. Homeowners Insurance Companies,” highlights a staggering $15.2 billion underwriting loss in 2023. The loss is more than double the previous year’s figure and represents the worst in more than two decades, with the 2011 loss of $14.8 billion being the next highest.

The report notes that urbanization and population growth in areas prone to natural disasters are exacerbating the problem. U.S. Census data shows that California, Florida, Georgia, North Carolina, Texas and Washington, all states known for extreme weather events, together accounted for 53 percent of the nation’s population growth from 2010 to 2020.

“The U.S. population grew 7.4% from 2010 to 2020, but it increased 10.2% in the South and 9.2% in the West during the period,” noted David Blades, associate director of industry research and analytics at AM Best. “Population trends show that people are increasingly moving toward areas that are more vulnerable to hurricanes, severe storm surges, or even wildfires.”

According to the report, insurers offering homeowners coverage in New England on a direct basis posted an average combined ratio of 79.3 over the decade ending in 2023. By contrast, combined ratios in the Pacific, Southwest and Rocky Mountain regions were above breakeven, with the South Atlantic and South regions, including Florida and the Gulf Coast states, exceeding 92.

“Population growth means higher property development and therefore higher insured values,” explained Christopher Graham, senior industry analyst at AM Best. “Building in disaster-prone areas increases flood risk. It also increases the risk of wildfires in areas exposed to human activity, as do utilities.”

The challenges are compounded by restrictive regulatory environments in many major disaster-prone countries, complicating insurers’ ability to manage high loss costs. Insurers are increasingly considering strategic options to scale back or cease operations in certain markets due to concerns about pricing adequacy.

In addition, the reduction in reinsurance capacity, due to unfavorable underwriting results in the homeowners segment, continues to weigh on primary insurers. As a result, AM Best expects loss ratios to remain under pressure, making a return to underwriting profitability unlikely in the near term.

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