U.S. crop insurers face worst results in 25 years: A.M. Best

U.S. crop insurers are facing “the worst underwriting results” since 1988, according to ratings firm A.M. Best Co., due in part to the ongoing drought.

Oldwick, N.J.-based A.M. Best estimated in a recent report that gross underwriting losses as of the third quarter of 2012 will be about $15.5 billion, on estimated premiums of $11 billion. All figures are in U.S. currency.

The report, titled As Drought Lingers, Crop Insurers Face Worst Underwriting Results in 25 Years, uses data from a survey of firms offering multiple peril crop insurance (MPCI), a program subsidized by the U.S. government but where the insurance is sold by private firms.

The report, released Dec. 28, notes that 2012 had the hottest March on record in the U.S., with the hottest and driest June-July period since 1936 in the corn belt.

“As of the end of November, 2012, drought conditions showed no signs of improving,” according to the report, which notes that the drought is “negatively affecting the winter wheat crop.”

According to A.M. Best, there are 15 private insurers in the MPCI program and the U.S. government spent more than $7 billion to subsidize premiums in 2011.

“Crop insurance is no longer a small program and the cost is raising concerns in Washington as lawmakers debate changes to the current insurance program,” according to the report. It used data from respondents representing more than half of the direct premium written in the MPCI program, and for firms that did not respond, A.M. Best used estimates based on market share.