Final report: Hail insurance industry reports near-record claim payments in 2021
The crop hail industry paid out near record payments on the prairies for 2021. Recording more than 12,000 claims, industry payments to prairie producers will total more than $322 million – an amount not seen since 2008. Producer premiums totaled more than $309 million for an industry loss ratio of 104 percent. This loss will impact the balance sheet of most participating companies.
Prairie farmers were optimistic when the seed went in the ground and it was time to purchase their crop hail insurance coverage. Dry conditions were widespread across the western prairies. There were concerns going into the season after minimal fall moisture and little snow cover, but some timely early spring snow and rains brightened the outlook for seeding and provided hope.
Record dry was reported through southern Manitoba and a large portion of south and western Saskatchewan, as well as much of Alberta. The weather dried out quickly and with little to no reserve moisture and record heat, crops in areas soon started to suffer. By July hopes were dashed with extreme heat and drought like conditions across much of the prairies, resulting in plummeting yields. The hot and dry conditions made way for an early start to harvest. Grain prices remained at near or record levels throughout the summer and heading into harvest.
The industry set record-level sums insured of more than $8 billion as crop prices surged and spring looked promising. Producers continued to welcome industry rate declines in what continues to be a very competitive marketplace.
Storm frequency was below average in 2021. The number of days producing active weather fell below the 5-year average. Storm severity, or the cost per claim quickly built like the clouds that cause the hail. What looked to be an average storm season endured record high claim payments. All three prairie provinces had average cost per claims higher than the 5-year average. The industry saw record loss payments from the activity with storm severity (average per claim) up 78 percent compared to the 5-year average.
With the lack of moisture, the western prairies received less-than-average storm days throughout the summer, but storm severity made up for the decrease in storm days. The summer started off slow with June seeing storm activity down 25 percent from the 5-year average. July continued with limited active weather. However, the limited storms produced in July were the start to what was to become an expensive claim season.
Hardest hit was Saskatchewan with an industry loss ratio of 134 percent compared to 2020’s 65 percent. Alberta followed with a 97 percent loss ratio, compared to 75 percent in 2020. Manitoba was the only province to record a positive year with a loss ratio of more than 26 percent.
The isolated severe storm tracks brought moisture to localized area producers, but the severity left little if any crop, or time for crop recovery, to an already dismal production.
The Canadian prairie storm season runs June through October. This year June and July saw limited storm activity with active storm days down by about 20 percent overall compared to the 5-year average. August activity picked up becoming more average. September, with harvest in full swing across the prairies, recorded lower than average activity. Despite the lower activity across most of the summer, claim frequency (claims to policy) ended up being down by only 4 percent compared to the 5-year average.
Alberta crop hail results clouded with storm activity
Alberta’s storm activity resulted in heavier-than-average loss expense for the industry. The claim to policy ratio was 25 percent above the 5-year average. Average cost per claim saw an increase of more than 21 percent of the 5-year average. The industry reported 9 major storm days in July and August, resulting in more than 1,200 claims and costing more than $56 million.
Alberta’s costliest day was August 31 with more than 600 claims resulting in more than $20 million being paid. Following a close second was July 22 with 495 claims and a total payout of over $17 million. Total hail payments for 2021 were more than $82 million the most expensive since 2016.
Total sums insured saw a small increase from 2020, with average rates charged reporting a slight increase, likely due to continued declining industry results.
Saskatchewan records largest crop hail payouts since 2008
This year’s hail losses rivaled the worst ever recorded for the industry, with loss payouts of more than $224 million. Only 2008 recorded higher claim payouts. This resulted in an industry loss ratio more than 130 percent.
The season had an early start on June 5 with a west central storm. However, the reminder of the summer saw limited but costly storm dates. The industry reported 4 major storm dates in July with more than 2,600 recorded claims costing more than $98 million.
August which saw a more average storm activity month recorded 5 major storm dates. It was August 31 and September 1 that pummeled the industry to its final loss numbers. With almost 1,800 claims and a cost of more than $43 million, this storm was still only the second worst of the season.
The single largest loss day was July 22 with more than 1,300 claims at a cost of more than $53 million. July accounted for more than 43 percent of claims paid for the year.
With the number of claims-to-policies being 12 percent higher than the 5-year average, it was really the severity of the damage that devastated the industry. The average cost per claim was more than double the 5-year average.
Total sums insured saw a slight increase year-over-year, likely due to the increase crop prices and early crop outlook prior to the drought and heat like conditions. With the industry average rate charged continuing to decline for 2021, the current average rates are now at or near their lowest historic levels.
Manitoba records sunny results for the hail industry
Seeding was mostly complete by early June. The absence of rain was a concern early after a dry winter. With below average precipitation through June, and some frost and pest concerns, crops had a below average start.
Manitoba’s hail season did not really get underway until mid-July. The dry summer provided little convective weather to produce storm activity. The industry reported only 4 major storms in July resulting in 419 claims with a payout of $6.4 million.
Historically July is one of the most active months. With the dry weather throughout the summer, Manitoba recorded below average claim activity. The number of claims to policy was down 66 percent from average. Hail frequency (active weather) was down about 15 percent from average. The average cost per claim (severity) was up about 23 percent compared to the 5-year average.
Total claim payments were more than $15 million, comparable to 2020, resulting in an overall loss ratio of 26 percent. Industry reporting sums insured were up about 10 percent. The industry average rate charged saw a minimal decline, likely due to the historic loss results and the continued competitive nature of the industry.
Who we are:
The Canadian Crop Hail Association (CCHA) has been serving the crop insurance industry in one form or another since 1915. It is a member-driven organization that represents the interests of the Canadian Crop Hail managing general agencies and insurance companies. CCHA member companies write Crop-Hail insurance product totaling more than $300 million in premium, and liability totaling more than $8 billion. Our companies service agriculture producers in the western prairies. These private and government organizations together provide a risk management tool to the Western Canadian prairie farmer. Members are Additional Municipal Hail Ltd. (Saskatchewan), AG Direct Hail Insurance Ltd, Agriculture Financial Services Corporation (Alberta), Canadian Hail Agencies Inc, Co-operative Hail Insurance Company, Manitoba Agricultural Services Corporation Rain and Hail Insurance Service Ltd., New Brunswick Agricultural Insurance Commission and Palliser Insurance Company Ltd.