Insurers who sell coverage compensating farmers in the event of damage to their crops could be hit by claims from severe flooding in parts of the U.S. Midwest, according to an analyst report.
While it is too soon to know the extent of crop losses from the recent flooding — which has wreaked havoc in parts of Iowa and Illinois, and is the worst in 15 years — growing concern that the flooding will seriously dent corn production boosted prices to record highs on Wednesday.
Those who sell crop insurance coverage may find themselves on the hook for claims from flooding damage, including property-casualty insurer Ace Limited, a large provider of multiperil crop insurance, and Wells Fargo Group, the second largest U.S. provider, according to a chart compiled by the insurance team at brokerage Stifel Nicolaus.
Ace Limited had a 17 percent market share in 2007, according to Stifel, while U.S. bank Wells Fargo had a 16.7 percent share of the market for multiperil crop insurance coverage, according to Stifel’s note.
Neither Ace nor Wells immediately responded to questions on whether the Midwest flooding could trigger crop claims in their policies.
Multiple peril crop insurance covers a wide range of yield-reducing conditions, according to New York-based trade group, the Insurance Information Institute.
The coverage can include such things as damage to crops from drought, flood or insect infestation, and is subsidized by the federal government.
Most homeowner and renters insurance policies do not include flood coverage, although some private insurers sell it separately, as does a federal government scheme. Only 17 percent of Americans buy the coverage, according to the Insurance Information Institute.
(Reporting by Lilla Zuill, editing by Phil Berlowitz)