Munich Re Says World Crop Insurance Costs Top Record on Drought
Global crop insurance claims were the highest ever last year after drought cut yields in the U.S., historically the biggest grower of corn and soybeans.
Claims worldwide were worth about $23 billion in 2012, with $15 billion going to growers in the U.S., said Karl Murr, who heads the agriculture unit at Munich Re, the world’s biggest reinsurance company. About 85 percent of farmland is insured in the U.S., compared with 20 percent globally. U.S. corn and soybean harvests slid to a six-year low in the past season after the most severe dry spell since 1956.
“Drought was by far the single most important cause of losses in 2012,” Murr said yesterday in an e-mailed response to Bloomberg questions. “With the U.S. representing about 50 percent of worldwide crop insured values, they obviously took the lion’s share of payouts in 2012, dwarfing loss payouts in Europe, including eastern Europe.”
Corn and soybean prices rallied to records last year on the Chicago Board of Trade as yield prospects declined and rising demand depleted world stockpiles. As of Jan. 21, U.S. farmers had collected about $12.35 billion in insurance claims since the marketing year began, surpassing the $10.84 billion at the same time a year earlier, according to the U.S. Department of Agriculture’s Risk Management Agency.
Combined output of corn and soybeans dropped to 355.9 million metric tons in the 2012-13 season, down 11 percent from a year earlier, according to the USDA. While the U.S. is the world’s biggest corn grower and exporter, Brazil is expected to overtake the North American country as the top producer and shipper of soybeans this season.
Claims in the past year surpassed payouts in 1988, a year when drought slashed U.S. corn production by 31 percent. That year, farmers collected less than $1 billion in crop insurance claims on crop damage worth $15 billion, Murr said. Nearly half of the U.S. still is experiencing abnormally dry conditions, according to the U.S. Drought Monitor. Winter wheat at the end of November was in the worst shape since records began in 1985.
Dry weather also damaged crops in the past season in Russia, Kazakhstan, Ukraine, Argentina and Brazil, while Poland suffered from a cold snap and the U.K. had its second-wettest year on record. Flooded fields probably cost British farmers about $2.1 billion (1.3 billion pounds) in damage, much of which wasn’t insured, Murr said.
“Only a few European countries have crop insurance, and most of that only covers hail, but not the more dramatic risks like drought and flood,” Murr said. “Therefore, still in 2012, large agricultural production losses were not insured.”
Munich-based Munich Re has a gross written premium in agricultural reinsurance valued at about 1 billion euros ($1.34 billion), compared with total written premiums of 26.5 billion euros, the company said in an investor briefing in October. The company will probably pay out the most ever for agricultural losses due to last year’s drought, Murr said. Munich Re said in November that crop failures may cost it about 160 million euros.
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