Agricultural Insurance

Despite growth in covered acreage, revenue from collected premiums for the Agricultural Insurance sector fell over the five years to 2020. Premiums in the industry fell as the prices of main goods, such as soybeans and maize, fell.

Crop insurance is mainly provided by industry producers, and it protects against crop damage due to natural disasters as well as sales loss due to drops in agricultural product prices.

The federal government is actively active in the sector, subsidized insurance rates for growers and supplying reinsurance to industry operators.

Losses from different crops and geographies are often highly correlated, resulting in large structural consequences from natural disasters such as drought and storms.

As a result, government aid encourages producers to maintain crop productivity while also allowing market participants to continue providing agricultural insurance.

Despite continuing growth in crop insurance contracts and covered acreage, steep losses in 2015 and 2016 have resulted in a five-year recession in the Agricultural Insurance sector.

Farmers may get crop insurance from the agricultural insurance industry, which protects them against crop damage due to natural disasters and income loss due to agricultural commodity price decreases.

Agricultural insurance policies are often referred to as farmers’ most effective risk control mechanism.

Despite growth in overall commodity contracts and covered acreage over the last five years, variations in the price of premiums sold, as well as the underlying agricultural goods attached to such premiums, have reduced income for business operators.

As a result, income in the sector is expected to fall at an annualized rate of 1.3 percent to $10.0 billion over the next five years.

Thanks to a marginal increase in farm crop prices, business income is forecast to grow 2.7 percent in 2020.

Regulatory reforms are expected to shape the success of the Agricultural Insurance sector over the next five years, until 2025. The Agriculture Act of 2014, also known as the Farm Bill, identified discretionary outlays over the next ten years to cement crop insurance as the most effective way for farmers to control supply and price risk.

Furthermore, the Fixing America’s Surface Transportation (FAST) Act, which was largely signed into law to encourage infrastructure development in the United States, contained a financial outlay of $3.0 billion for crop insurance services, which will be allocated over the next ten years.

The Farm Bill is estimated to increase federal spending on crop insurance from $8.4 billion in 2020 to $8.5 billion by 2025. Revenue in the sector is projected to rise at an annualized rate of 0.8 percent to $10.4 billion over the next five years.

Agricultural insurance, also known as crop insurance, is paid by agricultural growers such as farmers and ranchers. It defends against crop losses caused by natural disasters such as hail, drought, and flooding, as well as sales losses caused by drops in agricultural commodity prices.