Multi-peril crop insurance represents a very modest portion of U.S. property/casualty insurance industry revenues. However, this segment has garnered considerable attention as scorching summer heat and extensive drought conditions in 2012 wrought large crop losses across multiple agricultural regions.
Executive SummaryCarriers seeking growth opportunities are still attracted to the crop insurance sector. Although a string of profits came to an end in 2012, the lack of correlation to other lines and the availability of reinsurance through the Federal Crop Insurance Corporation are among the factors drawing new entrants, Fitch's Gretchen Roetzer reports.
The world’s two most costly natural disasters in 2012 were in the United States, with Hurricane Sandy and the summer drought generating an estimated $100 billion in economic losses. Crop losses have subsequently led to insurers reporting underwriting losses on crop insurance business. Insured losses from Sandy net of reinsurance (high-end estimates at $25 billion) are considerably more substantial than private crop insurer underwriting losses that could fall between $1-2 billion. Losses from both events have significantly affected near-term earnings, but have not adversely impacted capital levels.