Major flooding points to record prevented planting payments in 2019

Drenching rains and lingering flooding have devastated the Midwest region’s agricultural economy and left many farmers with a difficult choice of deciding whether it is worthwhile to plant this growing season. Their decisions will have a substantial impact on insurers’ crop insurance losses. How large could these losses be and where will they originate? A growing amount of data points to record insured prevented planting (PP) losses.

With the heavy rains this spring, many states are expected to develop double-digit PP loss ratios, which will result in overall diminished underwriting gains or possibly losses. How leveraged the “all other” loss ratios will be in many states still depends on a number of factors, but PP losses are expected to be substantial. This means that “all other” losses will need to be minimal in many states to maintain double-digit underwriting gains in these states.  While it is too early to predict 2019 results with certainty, the underwriting returns posted in the last several years look like a fleeting possibility.

In this paper, Milliman’s Carl Ashenbrenner discusses how farmers purchase crop insurance, what PP losses may look like for 2019, and what the overall industry impact could be.

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