Farmers have collected $3.65 billion in crop insurance indemnities on 2016 production, a much smaller amount than in preceding years. Economist Gary Schnitkey of the University of Illinois says the loss ratio — payments divided by premiums — of 0.41 was the lowest in 27 years of data available on the Risk Management Agency’s web site.
“Relative to total premium, few crop insurance losses occurred across the United States,” wrote Schnitkey at farmdoc Daily. “Yields were above average in most areas, and crop prices did not fall enough to cause payments. In addition, prevented planting did not occur on a large scale. Overall, 2016 was an exceptional year of low losses.”
The average loss ratio over the past decade is 0.81 for all policies sold through the federally subsidized crop insurance program. The highest was 1.59 due to drought in 2012. Schnitkey said loss ratios have declined each year since 2012.
In its most recent summary of business report, RMA says producers and the government paid $9.32 billion in premiums on 2016 crops. The government share of the premium, roughly 62 cents on the dollar, was $5.86 billion. Indemnities were $6.08 billion on 2015 crops, $9.13 billion on 2014 crops, $12.08 billion on 2013 crops and $17.45 billion because of the 2012 drought.