Crop Insurance Today Second Quarter 2022 - 24

On November 15, Marcia Bunger was named
the new Administrator, becoming the first member
of the Asian American and Pacific Islander
community and the first woman to serve as RMA
Administrator. Based on her previous experience
and relationship with farm programs and crop
insurance, she immediately jumped right in by
participating in the NCIS Fall Train-the-Trainer
Conference and actively working with industry
leaders to continue moving the program forward.
Drought in the West, High Plains,
Northern Plains, and Other
Loss Events
In this section, we take a closer look at the regional
weather events occurring in 2021 and the
associated program experience. These weather
events brought their own challenges and opportunities
for the crop insurance program to successfully
demonstrate why it is the farmer's go to
program for risk management. The Far West continued
to suffer drought from lack of snow pack
and rains, with irrigation water supplies drying
up and perennial crops and non-irrigated fields
withering in the heat and extreme dry weather.
And in the Dakotas and Montana, the crippling
drought was compounded by grasshoppers feasting
on any remaining vegetation. Drought and
heat related losses made up over 50 percent of
the roughly $9.1 billion in total indemnity payments
in 2021, accounting for approximately
$4.6 billion paid to farmers. Aſter several recent
years of excess moisture conditions, North Dakota
had a turn of events and incurred the most
drought related indemnities of over $1.5 billion.
South Dakota followed with over $580 million,
along with Minnesota and Montana with $483
and $474 million, respectively. The wheat crop,
with indemnities of about $1.3 billion, was the
most impacted by drought, followed by corn
and soybeans of $1.1 billion and $813 million,
respectively. Other crops grown primarily in the
northern plains like dry peas, dry beans, and
canola ranked next in highest drought related
payments. And in West Texas and the panhandle
it continued to be dry with indemnities paid
on cotton and grain sorghum losses. RMA issued
four Manager Bulletins providing relief and flexibilities
for various drought related reasons. The
first recognized the severe drought conditions
generally across much of the country, authorizing
emergency procedures to streamline and accelerate
the adjustment of losses. This would help prevent
unnecessary delays in processing claims and
24 SECONDQUARTER2022
allow farmers to make timely policy decisions
to maximize their risk management protection.
AIPs began early to make crop appraisals and inspections,
timely release acreage, and make timely
payment of indemnities to insured farmers
when they most needed them. With the drought
showing no signs of letting up in many areas of
the country and farmers seeking additional assistance,
RMA responded by providing flexibility to
help farmers and ranchers by authorizing AIPs
to provide additional time for farmers to make
payment of premium. The drought also affected
the needed supplies of livestock feed and forage
causing ranchers to market livestock sooner than
anticipated, which led RMA to announce measures
authorizing AIPs to waive the 60-day ownership
requirement for Livestock Risk Protection
Specific Coverage Endorsements beginning in
August. And by late August RMA, determined
that the early harvest adjustment would not apply
to any sugar beet units when the AIP determined
that drought was the primary cause of loss.
But as so oſten happens within the Federal
crop insurance program, the flip side of drought,
excess moisture losses, can be devastating to
others. Excess moisture, precipitation, and other
related causes of loss resulted in the second
most indemnities paid, over $1.5 billion. Of this
amount, almost 70 percent of the indemnities
were paid for harvested or unharvested acreage
impacted by weather events with too much rain
or moisture. Over half of these indemnities went
to five states, with Texas receiving $220 million,
Arkansas $194 million, Missouri $174 million,
Georgia $120 million, and Mississippi $101 million.
And when discussing losses due to excess
moisture and precipitation one usually cannot
disregard prevented planting losses. However,
2021 turned out to be a somewhat quieter year
for prevented planting payments with $569 million
being paid nationwide due primarily to excess
moisture-precipitation and failure of the
irrigation water supply. California and Arkansas
were the top two states with prevented planting
payments of approximately $182 million and
$116 million, respectively. Rice, with $195 million,
and corn with $105 million, were the top
two crops in prevented planting payments. This
was, however, a considerable turnaround from
the prior to two crop years.
The 2021 hurricane season was relatively
quiet, with indemnities of around $37 million
in areas where the Hurricane Insurance Protection-Wind
Index Endorsement (HIP-WI) was
available. In its second year, HIP-WI saw several
revisions and clarifications made to improve coverage
and offer greater transparency in the methodology
for triggering counties. The program for
the 2021 crop year saw almost 23,000 endorsements
earn premium with liability of more than
$1.1 billion. And experience was far different
than the first year, when there were seven named
hurricanes, with only two named hurricanes, Ida
and Nicholas, resulting in indemnities of approximately
$80 million and a loss ratio of .47. Hurricane
Ida caused enough infrastructure damage
just prior to major crop insurance program sign
up deadlines that RMA granted farmers flexibilities
in those deadlines to assure they could meet
linkage requirements for the Farm Service Agency
Quality Loss Adjustment and Wildfire and
Hurricane Indemnity Program-Plus programs.
The 2021 crop year ended up experiencing
good weather and excellent resulting crop yields
in many areas of the country, with an overall
crop program loss ratio anticipated to be approximately
.67. As crop prices began an upward
movement in late summer and early fall, farmers
could begin to look towards the prospects of
positive returns aſter struggling through COVID
issues and the extreme back-to-back weather
events of 2019 and 2020. However, it would not
be long before those prospects were dampened
by new threats on the horizon of significant escalating
input costs.
Growing, Improving and Expanding
Program Coverage
The efforts of both the industry and RMA
continued in earnest towards expanding the
availability of coverage for new crops, areas, and
production and marketing risks, along with the
never-ending task of continually maintaining
and improving the 134 various crops and livestock
programs. Together they represent over
600 crop-livestock and related differing types insured
in today's program. The myriad of options,
endorsements, and various elections available in
today's program totaling over 170,000 different
county crop program actuarial offers. Challenges
abound in maintaining and keeping current on
prices, premium rates, underwriting rules, special
provisions, and key agronomic planting dates
among many other factors in establishing the
multitude of insurance offers available to farmers.
All of this occurs while still dedicating time
and making key efforts at improving existing
policies and coverage. And as the popularity and
effectiveness of the program has soared in the last
Crop Insurance Today Second Quarter 2022

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