It Is Time for Ag Co-ops to Pay the Insurance Piper

Key Points

• The increasing frequency and severity of global catastrophic events over the past decade have inflicted major financial losses on society, the insurance industry and agribusiness. U.S. losses to catastrophes totaled $170 billion in 2022, which is about triple the long-term average dating to 1980.
• U.S. property and casualty (P&C) insurers have responded by raising prices. In fact, the magnitude of the three years of above-average losses has driven one underwriter, Austin Mutual, to exit the market.
• U.S. grain and farm supply cooperatives paid 40% to 60% more (risk-adjusted) during the 2023 renewal season (both January and April). Rates for customers that experienced property losses during 2020 to 2022 increased up to 100%.
• CoBank believes that commercial property insurance rates will remain elevated for the next 12 to 18 months as P&C companies attempt to make up for recent year losses and pursue rate adequacy in an environment of high costs for labor, building materials and financing.
• While there is no one “silver bullet” solution that is applicable across the board, we conclude that cooperatives can reduce some of the bite of higher P&C costs by improving internal loss control and purchasing property insurance through a hybrid insurance program.

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