Standard & Poor reports that insured crop losses caused by the worst drought since 1988 could cost insurers and reinsurers more than $5 billion.

The rating service says crop insurers “will see some of the worst underwriting results on their books” in 24 years, but the losses will be manageable because of “loss sharing from the U.S. government and diversification with other lines of business.”

This updated loss projection is nearly double the $2.8 billion estimate Milliman released just weeks earlier. In the Milliman report, the trade group representing the crop-insurance industry stated insurers had already paid out $822 million by early August. The group explained that high losses were due to prolonged drought conditions in the Midwest and underwriting losses for 12 major corn- and soybean-producing states.

Crop insurance operates through the Multiple Peril Crop Insurance program administered by the U.S. Department of Agriculture’s Risk Management Agency. The program covers 80 percent of insurable U.S. farm land. That translates into 264 million acres, 1.14 million policies, and $110 billion worth of liability on about 500,000 farms, says S&P.

The worst affected areas so far this season are Kansas, Illinois, Kentucky, Indiana, Missouri, and Tennessee. For its part, rating service Moody’s says that a U.S.D.A report earlier this month said that this is the worst drought in the Midwest in 50 years and that conditions are credit negative for U.S. crop insurers.

Moody’s says the 12 top crop insurers in the United States had total direct premium written in 2011 of $12.4 billion of which $5.8 billion is in the top 12 drought states. Of those 12, Rural Community (a Wells Fargo Company); Producers Agricultural, and John Deere Insurance Co. have more than 90 percent of their DPW in crop insurance. According to Moody’s, the 12 states most impacted by drought Moody’s says are: Arkansas, Georgia, Illinois, Indiana, Iowa, Kansas, Mississippi, Nebraska, Oklahoma, South Dakota, Tennessee and Wyoming.