A homeowners insurance crisis in the next decade will only be prevented if regulators and state lawmakers allow insurers to charge a rate commensurate with the risk, an annual report from Aon Benfield has warned. Aon BenfieldÃ¢â‚¬â„¢s annual Homeowners ROE Outlook says the prospective return on equity (ROE) for homeowners insurance fell to 6.1 percent in August 2009, from 6.5 percent a year ago and is now far less than the increased cost of insurer capital resulting from the global credit and liquidity crisis. Countrywide, for insurers to attain an ROE of 14 percent homeowners rates would need to increase 26.4 percent. However, a number of states, including those prone to hurricanes, would require far higher rate increases. For example, Florida would require an average rate increase of 93.5 percent, Rhode Island 51.2 percent, and Massachusetts 44.6 percent for insurers to achieve an ROE of 14 percent, according to Aon BenfieldÃ¢â‚¬â„¢s analysis. Ã¢â‚¬Å“Homeowners insurers continue to struggle through the labyrinth of state rate making laws, regulations, consumer price protections, rate making process delays, and market disruptions from lightly financed and competitive state funds to recover their increasing costs of capital Ã¢â‚¬“ and they lost ground during the last year even though they paid billions in catastrophe claims to policyholders in recent years,Ã¢â‚¬ Aon Benfield says. The inability to earn reasonable returns from writing homeowners insurance discourages the participation of private capital in the market, leaving states to attempt to finance the highly volatile risks of their constituents and then look to the federal government for aid. For more on this story, check out National UnderwriterÃ¢â‚¬â„¢s October 26 article. Check out I.I.I. facts and stats on homeowners insurance.