More challenges for crop insurers

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5 March 2012

The floods in Queensland, NSW and northern Victoria will affect the yield of some summer cereal crops.

Peter Book, Underwriting Manager at Primacy Underwriting Agency, says such events put pressure on farmers’ business costs.

“They have a knock-on effect reducing margins which leads farmers to cutting costs,” he told insuranceNEWS.com.au. “They are insuring for less value which also has a knock-on effect on crop premiums.”

The Australian Bureau of Agricultural and Resource Economics and Sciences has forecast good yields for summer cereal crops, with production tipped to rise by 18% to 5.4 million tonnes.

But the bureau is warning that final figures cannot be accurately forecast until the floods have disappeared and the true nature of the damage can be assessed.     

Mr Book says there has been an increase in claims activity, but contraction of agribusiness sectors such as horticulture and viticulture has also put pressure on premiums for crop insurers.

“The impact of a number of managed investment schemes ceasing, such as Great Southern and Timbercorp, is being felt by insurers,” he said.

“But we have seen some withdrawal of underwriting capacity operating in that segment so that is a positive for premiums.”

While some agribusiness sectors are under pressure, Mr Book says insurers with a balanced portfolio of crops are still attractive to reinsurers.

“There is still an appetite from reinsurers for a good performing crop portfolio,” he said.

“They are not scared of a good balanced book and we have also seen interest from specialist reinsurers.”