NU Online News Service, Jan. 30, 1:25 p.m.EST

National Crop Insurance Services (NCIS) says indemnity paymentssurpassed $9 billion for the first time in history in 2011, andMoody's Investors Service says this development could put smaller,geographically concentrated insurers at risk.

NCIS cites historic droughts in the Plains, flooding along theMississippi River and

deep freezes in the South for the $9.1 billion in payments, andsays the figure could grow to $10 billion as remaining claims aresettled.

Tom Zacharias, president of NCIS, says in a statement,“Thanks to the foresight of Congress, crop insurance has been inplace to weather enormous natural disasters and help ensure thatfarmers survive to plant yet another year. Those billionsin damages would have landed on the plates of input suppliers,lenders, marketers and farm families if crop insurance wasn'tin place.”

As noted in Moody's Weekly Credit Outlook, crop insurers arelicensed by the Risk Management Agency of the U.S. Department ofAgriculture and “generally cede a large portion of crop losses tothe federal government through the Federal Crop InsuranceCorporation's Standard Reinsurance Agreement.”

As such, Moody's says, “We expect that the industry-widecombined ratio for 2011 will come in below 100….

“However,” Moody's adds, “it will be significantly weaker thanin 2010, a banner year, and perhaps more in line with the moreloss-intensive 2008 and 2009.”

Moody's also says losses will vary considerably by group. Whilelarger, nationally diversified insurers should benefit from profitsearned in less-affected states and regions, smaller insurers thatfocus on single states and regions could see combined ratios over100, especially since many of these smaller insurers operate incentral and Midwest states.