Crop Insurance Today Second Quarter 2020 - 15

Table 3

Fig. 8

Share of Insured Acres Covered at 70% or Higher
90
80
70

Share of Insured Acres, %

60
50
40
30
20
10

19
20

17

18
20

20

15

16
20

20

14

13

20

20

12

11

20

20

10

09
20

20

08

07

20

20

05

06
20

20

04

0
20

insurance. In comparison, NASS reported that
the total number of acres planted to principal
field crops, excluding land used for cattle grazing,
was down by a little over five percent for the year.
The amount of liability insured during 2019
declined by one half of one percentage point
compared to 2018; however, premium increased
two percent to $10.1 billion. The number of insured acres increased 13 percent to 379 million
acres, due exclusively to growth of over 43 percent in the Pasture, Rangeland, and Forage program. Insured soybean acreage declined nearly
ten percent to 71 million acres but was offset by
an increase of 11 percent in insured corn acreage
to nearly 87 million acres. Farmers continued to
purchase high coverage levels in 2019 with the
share of acres covered at 70 percent or higher increasing to 84 percent from 83.5 percent during
the prior year (Figure 8).
The Federal crop insurance program's performance deteriorated significantly in 2019 due
in part to exceptionally high prevented planting
indemnities resulting from excessive moisture.
Gross underwriting gains (defined as gross premiums exceeding gross indemnities) for 2019
were the smallest since 2010, declining more
than 90 percent compared to 2018 (Table 3).
Only 2012 and 2013 had poorer results during
the period reviewed, with each year experiencing gross underwriting losses (defined as gross
indemnities exceeding gross premiums). Table
3 also provides several standard measures summarizing the performance of the crop insurance
program over the past 10 years.
Indemnity payments increased by 35 percent to nearly $9.9 billion, the highest level since
2013. Gross underwriting gains, the difference
between premiums and indemnities, declined
to $227 million, the third lowest level during

Data as of April 13, 2020
Source: RMA Summary of Business

the past ten years. The gross loss ratio, defined
as the ratio of indemnities to premiums, is the
traditional metric used for comparing the performance of the program over time. From an
underwriting perspective, the breakeven point is
a loss ratio of 1.00, with values below 1.00 indicating a year with underwriting gains and values
above 1.00 indicating a year with an underwriting loss. By this measurement, the program had
a very poor year in 2019 with a reported gross
loss ratio of 0.98; however, this value is expected
to increase a few points as any remaining open
claims are settled. Only 2012 and 2013 experienced worse underwriting performance with
gross loss ratios of 1.57 and 1.02 respectively.
In contrast, 2016, the best year in the history of
the program, had a loss ratio of 0.42, while 2017
came in at 0.54.
As was the case in 2018, Texas generated the
largest premium volume at $1.03 billion, and the

largest indemnities of any state, with loss payments of $1.17 billion (Table 4), corresponding
to a loss ratio of just shy of 114 percent. Excess
moisture accounted for roughly one quarter of
the crop damage in Texas, with drought accounting for another 22 percent. South Dakota was
second highest in terms of indemnities paid, but
fifth in premium volume, producing an overall
loss ratio of 165 percent. Just under 95 percent of
South Dakota's losses were attributable to excess
moisture and cold wet weather. North Dakota
ranked third largest for indemnity payments and
second for premium, experiencing a loss ratio of
95 percent. Again, a significant portion of North
Dakota's losses were due to excess moisture and
cold wet weather. Minnesota had the fourth
largest loss, 86 percent of which was caused by
excess moisture and cold wet weather, resulting
in a loss ratio of 135 percent. Rounding out the
top five largest loss states was Illinois with a loss

Federal Crop Insurance Program Performance, Gross Basis1

CROP
YEAR

POLICIES WITH
PREMIUM

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

1,140
1,152
1,174
1,224
1,207
1,205
1,160
1,125
1,108
1,105

UNITS WITH
PREMIUM

LIABILITY

PREMIUM

FARM-PAID
PREMIUM

78,085
114,210
117,160
123,811
109,904
102,539
100,620
106,087
110,170
109,622

7,595
11,972
11,117
11,808
10,073
9,769
9,328
10,072
9,898
10,107

2,883
4,509
4,138
4,511
3,858
3,679
3,462
3,717
3,631
3,751

Thousands

INDEMNITY

GROSS
UNDERWRITING GAIN

Million Dollars

2,572
2,527
2,529
2,584
2,539
2,547
2,442
2,370
2,330
2,349

4,254
10,869
17,451
12,085
9,136
6,316
3,911
5,429
7,308
9,881

INSURED
ACRES

LOSS
RATIO

Million

3,341
1,103
-6,334
-277
937
3,452
5,417
4,644
2,590
227

260
266
283
296
295
296
290
312
335
379

0.56
0.91
1.57
1.02
0.91
0.65
0.42
0.54
0.74
0.98

1
Data as of April 13, 2020
Source: RMA Summary of Business

CROPINSURANCE TODAY®

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