Crop Insurance Today Second Quarter 2023 - 22

FCI underwriting performance is provided in
Table 3. Indemnities for 2022 were approximately
$19 billion compared to $9.6 billion in 2021. The
gross loss ratio (indemnity divided by premium)
was 104 percent for 2022, up from the 70 percent
loss ratio in 2021 and considerably nearly equal
to the 105 percent loss ratio experienced in 2019.
Table 4 provides a breakdown of premiums and
indemnities ranked by both state and crop for
2022. In terms of premium volume, Texas, North
Dakota, Iowa, Illinois, and Kansas were again the
top-ranking states for 2022. With respect to indemnities,
Texas, Kansas and Nebraska were the
top three ranking states respectively. The ranking
of top crops by premium volume remained unchanged
in 2022 compared to 2021. Corn, wheat,
and soybean indemnities were ranked number
one, two and three at $4.9 billion, $3.9 billion, and
$2.5 billion in 2022.
The U.S. loss ratio map in Figure 10 reveals a
remarkable dichotomy in underwriting results between
regions in 2022, while several of the major
corn and soybean states experienced exceptionally
favorable loss ratios, the Southwest, West, and
Northwest had quite unfavorable results, and the
remaining regions tended to be about average.
Specifically, the states of Minnesota, Iowa, Wisconsin,
Illinois, Indiana, Michigan, and Ohio all
experienced loss ratios under 50 percent for the
FCI program. South Dakota, Nebraska, and Kansas
were the exceptions with loss ratios of 110 percent,
157 percent, and 190 percent, respectively.
Contrast the experience of the Midwest with
that of the Southwest, Northwest, and West regions.
Oklahoma, Texas, and California, along
with Rhode Island and New Jersey, all sustained
loss ratios in excess of 200 percent. The primary
cause of loss in these states was drought, except
for California where it was irrigation failure.
Table 3
Crop
Year
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Federal Crop Insurance Program Performance, Gross Basis1
Liability
Policies with
Premium
Thousands
1,224
1,207
1,205
1,160
1,125
1,108
1,106
1,112
1,167
1,193
1 Data as of July 16, 2023
Source: RMA Summary of Business
22 SECONDQUARTER2023
2,584
2,539
2,547
2,442
2,370
2,330
2,355
2,433
2,633
2,720
123,811
109,904
102,539
100,623
106,064
110,166
109,857
113,909
136,668
173,542
11,808
10,073
9,769
9,329
10,071
9,896
10,126
10,061
13,718
18,390
Units with
Premium
Premium
Farmer-Paid
Premium
4,511
3,858
3,679
3,462
3,716
3,630
3,757
3,744
5,110
6,760
Million Dollars
12,085
9,136
6,316
3,913
5,435
7,324
10,607
8,695
9,597
19,133
-227
938
3,452
5,416
4,637
2,573
-481
1,366
4,122
-742
Indemnity
Gross
Underwriting Gain
Insured
Acres
Million
283
296
295
296
290
312
335
379
398
444
494
1.02
0.91
0.65
0.42
0.54
0.74
1.05
0.86
0.70
1.04
Loss
Ratio
Figure 10
2022 MPCI Premium and Loss Ratios, All Plans Combined
National Centers for
Environmental
Information
Data as of July 16, 2023
Source: RMA Summary of Business
Oregon, Nevada, Arizona, New Mexico, Utah,
Montana, Wyoming, Colorado, Arkansas, Louisiana,
Florida, Tennessee, and South Carolina
all experienced loss ratios between 100 percent
and 200 percent, primarily due to drought or
excess moisture.
Revenue Products
The projected base prices used to establish
the value of a crop and the insured liability under
the Revenue Protection and Yield Protection
forms of insurance policies are shown in Table 5
for crop years 2016 through 2023. .Projected base
prices are the average of futures prices during the
discovery month, i.e., the month preceding the
sales closing date for a policy.
After increasing in 2021, projected base prices
increased again in 2022 for Winter Wheat, Corn,
and Rice, but declined for Spring Wheat, Soybeans,
and Cotton.
Commodity prices were up significantly across
the board for all commodities in 2022, including
over 40 percent increases for both spring and winter
wheat, a 29 percent increase for corn, a 28 percent
increase for cotton, a 21 percent increase for
soybeans, and a 14 percent increase for rice.
Implied volatility factors (IV) are derived
from futures market information and serve as
the measure of risk for expected harvest prices.
RMA annually calculates the implied volatility
factor for a crop by averaging the implied volatility
of in-the-money options for a designated
futures contract over the final five trading days
of the discovery period for that crop (generally
Crop Insurance Today Second Quarter 2023

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