Crop insurance and farm bill debates have dominated the news headlines and led to uncertainty and frustration for many farm and ranchers, but insurance experts in the agribusiness industry say the property/casualty segment of this market has actually remained stable in terms of rates and coverage options, so far.
Where insureds can expect to see some fluctuations, say agribusiness specialists, are in regions hard hit by weather this year.
Luckily, few natural catastrophes struck U.S. soil in 2013 but droughts in the West and bad winter storms in the Midwest and East may lead to some underwriters reevaluating their books of business.
“Weather is what drives how this segment is underwritten,” says Jim Henry, chief underwriting officer for MiniCo in Denver. “What you will see carriers doing is potentially reducing new writings in certain territories — especially those that have been hit with severe weather in the last few years.”
Henry says without the capacity to grow in regions that have been hard-hit, carriers may continue to renew but may not write new business. They may also raise rates, offer increased deductible options, restrict coverages and potentially remove wind/hail coverage deductibles.
One weather issue that can be less of an agribusiness worry on the P/C side is drought. Henry says limited access to water tends to be more of a crop insurance matter, but it is still something that Henry says he often hears insureds worry about.
“I just spoke with a farmer in California who raises cattle and the grass there has been so chewed down it is pretty much non-existent. He is worried that even with rain there may not be enough moisture for it to regrow,” he says.
Drought can also impact a farm’s bottom line and leave it short for other lines of insurance.
“In California, the impact of drought is significant. If they can’t water the crops they can’t grow them and if they don’t grow the crops they don’t have workers, so workers’ compensation is affected,” says Ron Abram, president of Rocklin, Calif.-based Abram Interstate, which writes agribusiness coverage in the Western U.S. “It does affect the insurance products we sell because [the farmer’s] inventory fluctuates.”
Abram says the overall agribusiness segment is a relatively robust marketplace. The agency does see carriers tightening up on specific classes of business because of national exposures.
“For the carriers we represent, we have seen some changes in rate or coverage but not as a result of regional results. It has more to do with national results and the changes they are making across the country,” he says. “In California in particular, property exposures in brush zones have seen pricing go up.”
Agribusiness product lines can include coverage for commercial agricultural operators or traditional farm and ranch owners with coverage extending to all aspects of the farm or ranch operations, including: growers, packers, shippers, nurseries, livestock, viticulture (wineries), equine, dairies and products (crops after they are harvested). Property, workers’ compensation, auto, farm equipment, farm buildings and home, machinery, inland marine, commercial and farm liability, and umbrella coverage are also usually part of an agribusiness program.
MiniCo began covering the agribusiness segment in 2012 after its parent company, Aran Insurance Services Group, reached an agreement with Zurich. MiniCo is currently approved to write its package program in 17 states with plans to be in two more by the end of the year and eventually in 30. Henry says so far they have been successful because of the comprehensive product they offer.
“Our program picks up not only the personal lines exposures but the commercial exposures as well,” he says. “If you think of a traditional farmer — they have a home, personal vehicles, farm vehicles, the farm itself, silos, heavy duty equipment out in the field, etc. Our product is a blend that addresses both needs.”
Henry says many other carriers have shied away from offering complete programs because agribusiness can be a difficult and expensive program to set up correctly. MiniCo is also looking for agents who specialize in the agribusiness industry to partner with them and help it expand its agribusiness book of business.
“We want to work with those agents who have knowledge and work directly with the farmers and are already well-versed in the industry,” he says.
There is no shortage of risks that affect the agribusiness segment. Food contaminations leading to recalls, in particular, have dominated the headlines and those in the food industry have to ensure they are taking extra precautions to protect their businesses from catastrophic loss.
For the larger, middle-market commercial agribusiness entities, Ironshore increased its excess liability limits for its lead umbrella policy from $25 million to $50 million because of the demand it saw from the agriculture space, says Jordan Gantz, chief underwriting officer for Ironshore’s Specialty Casualty Operations in New York.
Ironshore’s AgriProtection lead umbrella coverage, which was launched in 2011, provides excess liability and umbrella protection for large, middle market commercial agribusiness entities. The lead umbrella policy offers coverage enhancements for those risks that are not typically included in the standard umbrella market, such as coverage for herbicide, pesticide and fertilizer application, misdelivery of liquid products, and failure to supply. The carrier also put in an exception for anhydrous ammonia, liquid petroleum gas, and propane in it its pollution exclusion and the fungus exclusion doesn’t apply to products intended for bodily consumption. Mad Cow Disease and genetically modified organism coverage are considered on an individual account basis.
Gantz says Ironshore launched the lead umbrella product because of the need it saw in the marketplace for agriculture risks to have more protection against catastrophic loss.
“In this day and age, it is pretty clear that if you are putting out food to the general public you don’t have to be that big to assume a big exposure,” he says. “The agriculture industry wants more capacity and they want it with the same company.”
Gantz says the positive response and growth Ironshore has seen so far to the increased capacity is what led it to increase limits to $50 million, but it is going to be selective with this business and look at each risk on a case-by-case basis.
“The concern for a lot of these [agribusiness] companies is not just from Fortune 1000 multinationals — the larger middle- market companies distribute on a national or even an international basis and they will seek to buy more limits over time, not less,” says Gantz.
Gantz says Ironshore will be reviewing its coverage this year and possibly launching other enhancements for its agribusiness accounts, including a form of product recall expense coverage.