Crop Insurance Today - 19

pansion of existing coverage to new areas. In 2016,
examples of expansion of permanent programs
included coverage for production in additional
counties for blueberries in Florida and Georgia,
canola in Illinois, Indiana, North Carolina Tennessee, and Virginia, barley in New York, alfalfa
seed in Montana, forage seeding in California,
and wheat in Louisiana for the 2018 crop year.
In addition, sometimes situations create special conditions such as in the 2016 crop year in
California that resulted in claims for prevented
planting losses from areas where irrigation water
is provided by the Central Valley Project (CVP).
The CVP is a federal water management project
under the supervision of the U.S. Bureau of Reclamation which began in 1940. The project was
built primarily to protect the Central Valley from
water shortages and floods. The CVP supplies water to farms, homes, and industry in California`s
Central Valley counties and the San Francisco Bay
Area, as well as providing most of the water for a
large part of the California's wetlands. On April
1, the Bureau announced a five percent water allocation for contractors in the southern service
regions resulting in prevented plantings. This occurred despite a return to above average rainfall
and close to normal snowpack in the Sierras. Some
farmers had claims for losses primarily in Stanislaus, Merced, Fresno, and Kings counties that became subject to questions. After consultation with
the Department of the Interior, RMA concluded
that the water delivery shortage was an insurable
cause. However, given the special circumstances,
RMA acted to reinsure prevented planting losses
paid by AIPs in accordance with the Standard Reinsurance Agreement. With drought conditions
in the West beginning to ease we would expect a
decline in issues related to prevented planting due
to lack of irrigation water deliveries in California's
Central Valley.
RMA continued to pursue new product development for commodities not currently covered
with existing programs in 2016. For example,
work began on developing a contract to solicit
research and development of a crop insurance
product for garlic, grown primarily in California.
The initiative is in response to many requests for
garlic coverage, which is explicitly excluded from
existing onion crop coverage. RMA also provided
notification of intent to solicit research and development of a crop insurance product for vegetable
and flower seed crops. This preliminary work
would help determine if RMA should explore the
feasibility of developing a program based on find-

ings regarding the level of interest in a potential
program and availability of yield and price data.
Steps to conduct research to evaluate the existing
Dollar Plan of Insurance began. This work would
help determine if the program is meeting the
needs of farmers or if there is a need to consider
an alternative plan.
Ongoing research reports were also concluded and submitted to Congress for review for
programs on poultry catastrophic disease, catastrophic swine disease loss, and poultry business
interruption insurance caused by the bankruptcy
of the poultry integrator. Another final report was
received and in review regarding a policy to insure against a reduction in the margin between
the market value of catfish and selected costs of
production.

U.S. Crop-Hail Experience

For the United States, Crop-Hail insurance
generally refers to private policies in which direct
damage from hail is the primary cause of loss.
In addition to hail damage, many policy forms
carry endorsements for additional perils. For
the most part, the added perils include wind and
fire, although there are exceptions. This article
reports the results for all losses on hail policies,
including the experience of NCIS non-member
companies not included in NCIS' Annual Statistical Summary reports.
Premium for 2016 was $983.3 million, up
slightly from $979.7 million in 2015. Crop-Hail
premium has risen substantially over the past decade. Crop-Hail provided $36.2 billion in private
insurance protection to U.S. farmers in 2016 and
paid out $880 million in losses. (Table 8)
The program loss ratio, defined as paid losses
divided by premium written, increased to 0.90 in
2016, up from 0.76 in 2015, but still much better

than the record loss ratio of 1.22 in 2014.
Large storms were much more severe in 2016
than in 2015, with five days exceeding $25 million
in losses. The worst single day occurred on July
5, when a storm caused damages of more than
$36 million, primarily in the states of Minnesota
and Nebraska. Later in the same week, July 9, saw
total damages of almost $35 million; $28 million
of which were in North Dakota and $5 million
in Minnesota. July 7 had losses of more than $33
million, with more than $18 million in Nebraska
in combination with substantial amounts in Missouri and Iowa. In total, the losses from the top
ten storm days amounted to $240 million, more
than double the $111 million paid for the top
ten storm days in 2015, but well below the $420
million paid out in 2014. The period from July 4
through July 10 was especially hard hit, with total
payouts of $48 million in Nebraska, $47 million
in North Dakota, and $25 million in Minnesota,
with just under $10 million in Iowa, and $5 million in South Dakota.
Crop-Hail loss ratios by state are shown in
Figure 17. Colors identify states with similar loss
ratios, and shading is used to identify states with
similar premium volume. Crop-Hail insurance
was purchased in 42 states in 2016. Of these, 11
had a loss ratio greater than 1.00; these are shown
in purple and red on the map. Louisiana had the
highest loss ratio of 3.29 on a small premium volume of less than $2 million. The top five premium
volume states, Nebraska, Iowa, Minnesota, North
Dakota, and Illinois, had loss ratios of 0.89, 0.48,
1.07, 1.47 and 0.40, respectively. Overall, 20 states
had loss ratios of 0.50 or less, shown in pink and
yellow on the map. Five additional states, shown
in green, had loss ratios between 0.50 and 0.75,
and the final six, shown in light blue, had loss ratios between 0.75 and 1.00.

Table 8 U.S. Crop-Hail Results, All Perils

CROP YEAR

LIABILITY

PREMIUM

LOSSES

Mil. $

2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

19,392
27,540
25,493
27,170
36,691
39,407
39,773
39,652
36,805
36,178

489.6
669.4
621.3
682.2
843.2
955.8
953.2
991.7
979.7
983.3

235.2
555.1
565.9
460.4
974.5
704.3
646.2
1,209.9
740.3
880.1

LOSS RATIO

0.48
0.83
0.91
0.67
1.16
0.74
0.68
1.22
0.76
0.90

Data as of April 03, 2017
Source: Adjusted Verified Totals, U.S. only, for NCIS member companies combined with the data from non-members.

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