Drought-related crop-insurance losses could reach as high as $20 billion, according to the latest estimates.
“Although the 2012 growing season began on a very promising note, it became clear by the end of June that the crop-insurance industry was facing one of the worst agricultural droughts,” says catastrophe modeler AIR Worldwide, which issued a loss estimate of between $13 billion and $20 billion resulting from farmer claims.
AIR says it expects a gross loss ratio of the industry of between 120 percent and 180 percent.
“After government recoveries, which are available through the standard reinsurance agreement between crop insurers and the government, the total responsibility for the insurance companies and their private reinsurers, net after accounting for premiums collected, will be about $1 billion to $3 billion…,” says Gerhard Zuba, senior principal scientist at AIR.
AIR says con and soybean yields could be 40 percent below normal in some areas because of the drought. Low yields have already increased prices, AIR notes, with corn prices climbing by 142 percent and soybeans by 138 percent since planting this spring.
Farmers will not suffer a loss, says AIR, because they carry revenue-protection policies.
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