Best’s Market Segment Report: U.S. Crop Insurance Struggles Continue Due to Drought & Commodity Price Volatility
2024年7月26日 - 11:51PM
ビジネスワイヤ(英語)
Lower commodity prices have led AM Best to expect further
and more significant declines in U.S. crop premium levels for 2024,
according to a new Best’s Market Segment Report.
The report states that overall yields for corn and soybeans are
currently forecast to be slightly higher than 2023 and although
agricultural commodity futures prices for corn, soybeans and wheat
have declined moderately from projected levels, the reductions
remain within producer deductibles. “However, if prices continue to
decline, yields come in significantly below expectations, or both
occur, underwriting results for U.S. multi-peril crop insurance
(MPCI) writers will likely remain under pressure,” said Connor
Brach, associate director, AM Best.
The federal MPCI program and private crop insurance products
comprise the U.S. crop insurance segment, with an overwhelming
majority of premiums written through the MPCI program. Crop
insurance premiums overall declined modestly by 3% in 2023 but
remained elevated at $20.8 billion. This was driven by the premium
decline in the MPCI line, which dropped 3.6% to $19.3 billion in
2023. The balance is made up of private crop premium, which
increased by 4.4% to $1.54 billion during the same period.
According to the report, MPCI writers reported weaker results on
an aggregate basis in 2023. These results are subject to volatility
due to the catastrophe-like nature of the business. The segment’s
combined ratio deteriorated 4.5 points from 2022, to 107.3,
indicating a $750 million underwriting loss. Crop insurers have
struggled to achieve consistent underwriting profitability since
2019. Combined ratios for this segment have exceeded 100 in four of
the past five years, and averaged 102.6.
“These results are a notable deterioration from the 2014-2018
period, which benefited from profitable underwriting results in
three years and an average combined ratio of 91.1,” Brach said.
From a geographic perspective, the eastern half of the United
States had lower loss ratios than the western half. Notable
exceptions include the New England states, all of which generated
unfavorable loss ratios, but these are relatively small markets for
crop insurance products. Results in Texas, the largest state for
MPCI products, significantly improved year over year but the loss
ratio was still unfavorable, at 147.3, due primarily to drought,
heat, and hot wind conditions. Drought has been the leading
individual cause of MPCI losses in the three most recent years,
with over $6.6 billion of indemnities due to drought in commodity
year 2023 and an additional $1.4 billion of indemnities
attributable to excessive heat conditions.
Merger and acquisition activity over the past 15 years has led
to the significant concentration in the MPCI market, dominated by
the leading approved insurance providers. The slight decline in the
segment’s premium in 2023 was matched by the 3.8% decline of the
top five MPCI writers. Year over year, premium for US MPCI
contracted by 3.6%, versus growth of 35.5% in 2022 and 37.5% in
2021.
“This MPCI premium decline in 2023 reflects the impacts of
commodity price drops, offset by the continued growth in demand for
comprehensive coverage against perils, including adverse weather
events, pests, and crop diseases,” Brach said.
To access the full copy of this market segment report, please
visit
http://www3.ambest.com/bestweek/purchase.asp?record_code=344915
.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
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Connor Brach, CFA, FRM Associate Director +1 908 882 1668
connor.brach@ambest.com
Christopher Sharkey Associate Director, Public Relations +1
908 882 2310 christopher.sharkey@ambest.com
Al Slavin Senior Public Relations Specialist +1 908 882
2318 al.slavin@ambest.com