Missouri regulators will require the state's farm-mutualcompanies to purchase reinsurance to protect their maximum annualloss of surplus for property risks, a response to the 2011 Joplintornado that put one insurer in distress.

The Missouri Department of Insurance adopted new regulationsthis week that require farm-mutual companies to “carry enoughreinsurance that future losses would not deplete its surplus bymore than 20 percent in one year.”

Rural Missourians obtain their coverage from the state'sfarm-mutual companies if it is difficult for them to obtaincoverage from traditional property and casualty insurers.

“Regulators and insurance-industry groups teamed up tostrengthen this regulation, which is vitally needed,” says John M.Huff, director of the Missouri Department of Insurance in astatement. “This new requirement prevents farm mutuals from takingon more risk than they can handle. That protects their customers,who are mainly rural Missourians.”

The department says the new regulations, which take effect Jan.1, 2013, received the support of industry groups.

Mark Johnston, state affairs manager for the NationalAssociation of Mutual Insurance Companies, says in an interviewthat the regulation affects the state's domiciled farm mutuals thattypically have somewhere around $1 million to $2 million inpremium. He adds that the regulation does not affect the majorcarriers.

At least two other states, Iowa and Illinois have similarregulations, he says.