State Farm Faces Unprecedented Homeowners Loss Ratio Amid Severe Weather Challenges

State Farm is experiencing its highest homeowners direct incurred loss ratio in over two decades, as reported by S&P Global. During the first nine months of 2023, the ratio climbed to 84%, a stark increase from the 60.2% reported in 2022. If this trend continues, it will mark the fourth occasion since 1996 that State Farm’s loss ratio for homeowners insurance has surpassed 80%, with previous peaks in 2001, 2008, and 2017.

The primary cause of this surge is attributed to severe weather events affecting the US. The country faced various natural disasters, including hail storms in the South, severe winds in the Midwest and Southeast, and the notable Hurricane Idalia. The third quarter was particularly harsh, with eight weather events each costing over a billion dollars, and a catastrophic firestorm in Hawaii causing nearly $6 billion in losses.

In reaction to these elevated losses, State Farm has implemented rate increases, leading to a 10.4% growth in homeowners premiums, reaching $20.4 billion. The number of approved rate hikes for 2023 has notably doubled from the previous year, totaling 54. Furthermore, State Farm has received 22 homeowners rate hike approvals for the year, twice the number of the last two years combined.

Despite these challenges and the high loss ratio, State Farm maintains its position as the leading market share holder in the US homeowners insurance market.