Latest Figures Show 2012 Crop-Insurance Losses May Be Less Than Feared

Crop-insurance losses in 2012 due to drought conditions amount to a record $14.2 billion, and are continuing to climb, industry officials were told Wednesday.

However, the total losses will still be less than the $16 billion projected by the Congressional Budget Office last summer, industry officials say.

And the CBO is now projecting total indemnities, and the taxpayer-funded portion of those losses, will be much lower than crop-insurance critics warned about over the summer

The comments on the current loss outlook were made by Tom Zacharias, president of National Crop Insurance Services, a trade association representing crop insurers, at the annual meeting of NCIS and the American Association of Crop Insurers, now underway in Indian Wells, Calif.  

“This stands in sharp contrast to the wild claims made last summer by crop-insurance opponents who were angling to weaken farmers' most important risk-management tool,” Zacharias says.  He adds that academics and think tanks with an anti-farm-policy agenda supplied the media with sloppy estimates ranging from more than $20 billion to $40 billion in total indemnities.

“Critics also led people to believe that taxpayers would be on the hook for nearly all crop insurance payments to farmers, which is another fallacy,” Zacharias said.

He said final program costs for 2012 will reflect the $4.1 billion in premiums farmers paid to purchase insurance policies, losses by private crop insurance companies, as well as government investment.

“The ability of the crop-insurance industry to sustain back-to-back insured losses exceeding $10 billion, as it has done in 2011 and 2012, is a testament to the sound financial underpinning of the public-private partnership,” Zacharias says.

In 2011, losses of $10.8 billion covered flooding in the Midwest and drought losses in the Southern Plains.

 “More importantly, unlike natural disasters before the emergence of crop insurance, all of the cost is not falling on the laps of taxpayers,” Zacharias concludes.