Conning: Challenges Ahead for Homeowners

The period 2003-2007 was very favorable for the homeowners insurance line after the bleak 20-year period that preceded it. While returns relative to risk still do not compare favorably with other major lines, this five-year period did represent a marked improvement in financial performance for the line, according to a new study by Conning Research and Consulting. Yet, the immediate future may not be as favorable.

"Looking ahead, the uneasy state of the U.S. economy creates a series of challenges for homeowners insurers over the next several quarters--and likely the next few years," said Alan Dobbins, analyst at Conning Research & Consulting. "Conditions in the housing market will suppress growth as long as inventories remain at elevated levels and as values decline. Insurance-to-value will be adversely affected, and the threat of inflation could increase the cost of the average homeowners claim in the wake of declining premiums."

The Conning Research study, "The Homeowners Insurance Market: The Eye of the Storm," analyzes the economic and regulatory pressures on the line, as well as issues related to catastrophe management and distribution changes that will have profound effects on homeowners insurance in the coming years.

"With the increased pressures on the homeowners insurance line associated with both the economy and regulatory issues, it is clear that insurers will need to manage carefully through the next few years," said Stephan Christiansen, director of research at Conning. "Our research indicates that those insurers who have innovated in technology and are willing to innovate in policy simplification and more sophisticated pricing approaches will be at a significant advantage in this challenging environment."

"The Homeowners Insurance Market: The Eye of the Storm" is available for purchase from Conning Research & Consulting, by calling (888) 707-1177 or by visiting the company's Web site at www.conningresearch.com.