Crop insurance goes organic as demand increases
As consumer food habits and preferences change, agricultural and crop insurers are seeing increased demand for coverage for specialty crops.
And the traditionally stable agricultural risk insurance market is seeing movement as some insurers and brokers expand their businesses.
Agricultural and crop insurance is largely administered through a public-private partnership involving the United States Department of Agriculture and 13 private insurers who share the risk through what is known as the standard reinsurance agreement, which allows the government to guarantee about 80% of coverage.
While the USDA’s crop program is dominated by traditional commodities such as corn, wheat, and soybeans, it has seen significant growth in specialty crops. In addition, standard lines are applied to many aspects of the agricultural sector, from transportation to ownership.
USDA’s risk management agency has seen robust growth in its specialty crop programs, according to Richard Flournoy, the agency’s acting administrator based in Kansas City, Missouri.
From 1990 to 2020, the liabilities for insured special crops grew from $ 1 billion to over $ 20 billion, and the liabilities for organic crops also grew significantly (see box).
The growth of specialty crop insurance programs is the result of consumers’ tendency to consume more organic products. Sales of organic food and non-food products totaled $ 61.9 billion in 2020, surpassing the $ 60 billion mark for the first time, according to the Organic Trade Association.
“Over time we’ve tried to expand outside of these major crops, because you have a growing organic sector, you have a growing specialty crop sector. You have people who are more interested in consuming fruits and vegetables. We really tried to make an effort to exploit that more, ”said Mr. Flournoy.
For example, the USDA RMA All Farm Income Protection Plan can help small crop producers by providing a safety net for risk management as part of an insurance policy for all the products of a farm, as opposed to a single crop.
Producers have purchased over 2,000 of these policies to protect $ 2.26 billion in liabilities in 2020, and the RMA is revising the plan to make it more flexible and accessible to producers starting in the 2022 crop year. .
Expanding the available coverage can help increase food production.
“While these types of coverages come online and provide risk protection for these farmers – a cherry farmer in Michigan, an avocado farmer in Florida – the farmer has more insurance to enter this field. and produce that culture, ”said Bob Haney, Executive Chairman. of AgriSompo and CEO of AgriSompo North America, units of Sompo International Holdings Ltd. in Des Moines, Iowa.
Mr Haney said he has seen more insurance claims from people insured with special crops such as pistachios.
Lockton Cos. LLC has seen growth in the organics industry since expanding its crop insurance division in 2018, said Ginny Olson, vice president and senior account manager, crop insurance, who joined the broker. to help grow the business. “My growth has been in the organic space,” she said.
In mid-October, broker Hub International Ltd. expanded into the Californian agricultural market, acquiring the Jerry Baird Insurance Agency and the Baird Crop Insurance Agency, based in Fresno, specializing in crop and commercial insurance, particularly in the food industry.
Sompo extended further into the
agricultural sector with the acquisition in December 2020 of Diversified Crop Insurance Services, a subsidiary of CGB Enterprises Inc.
Diversified has been combined with ARMtech, Sompo’s existing federally sponsored property and casualty insurer, to operate under the AgriSompo North America brand with combined gross written premiums of over $ 2 billion.
Viable insurance for the organic produce industry is vital for its continued success both due to the relatively recent expansion of the industry relative to giant commodities, additional spending on organic fertilizers and others. problems, Ms. Olson said.
Ryan Chartier, based in Bloomington, Minnesota, Senior Vice President, National Head of Farming Practices at USI Insurance Services LLC, joined the brokerage in 2018 when it purchased the food giant’s insurance business. CHS Inc.
Mr. Chartier said his producers are focusing more on traditional insurance coverages for agricultural businesses, such as property insurance for grain elevators, whether private or cooperative. In addition, liability insurance for directors and officers of agricultural cooperatives, which usually have boards of directors, is an important line, along with general liability and more industry-specific coverages such as debit coverage. of stock and certain product recall insurance.
Among the crop blankets sold by USI growers, many involve specialized crop insurance, he said.
Cannabis and hemp coverage options expand to address growing risks
The rapidly expanding cannabis and hemp sectors fit into the farm practice groups of some agricultural insurance brokers and organizations.
Cannabis is part of the farming practice at USI Insurance Services LLC, said Ryan Chartier, senior vice president and head of national farming practice for the brokerage in Bloomington, Minnesota. The group has a few people specializing in coverage, he said.
Although the USI does not purchase insurance for cannabis crops, it does work with cannabis dispensaries, for which rates are starting to moderate as experience and data related to the industry increase, he said. -he declares.
“It’s actually a very good risk,” Mr. Chartier said of the dispensary industry, because “it’s so heavily focused on government compliance.”
The US Department of Agriculture has no involvement with cannabis due to the substance’s continued status as an illegal drug at the federal level. It does, however, insure hemp, which was legalized in the 2018 Farm Bill passed by Congress, according to Richard Flournoy, acting administrator of the USDA Risk Management Agency, based in Kansas City, Missouri.
“We insure the hemp as part of the income protection of the whole farm [program]”said Mr. Flournoy, which is designed for small farms and insures the entire business entity rather than individual crops.