Final report: Hail insurance industry sets record crop coverage
The crop hail industry set yet another record with nearly $10 billion in crop hail coverage – a 20 percent increase over last year.
Producers who waited to purchase hail coverage late in 2022 likely had a problem finding it due to the unanticipated demand.
With continued strong crop pricing, combined with increasing input costs, rising fuel costs and record inflation, producers increased record crop hail coverages to ensure adequate coverage was placed on their crops.
Claim activity was at or slightly below the 5-year average. Producer premiums totaled $265 million, which was slightly above the 5-year average. This resulted in an industry loss ratio of 71 percent – down from last year but still a significant impact on participating companies.
Prairie farmers faced mixed conditions at the beginning of the season.
Alberta seeding and conditions were at or near normal despite the south being persistently dry through the winter. Timely rains helped progress crops.
Saskatchewan had an early start in the south and west portions of the province with drought like conditions still a concern along the west corridor. The dry conditions provided some impact on crop production. The east side of the province battled a cool damp spring hampering and delaying early seeding progress. A dry fall season helped to ensure that all crops were harvested. Overall crop reports indicate an average to above average production year for most producers.
After a record dry 2021, Manitoba had a very wet start to the 2022 growing season. Saturated soils delayed seeding by up to four weeks in parts of the province. A warm and moderate summer allowed most crops to catch up to near normal development. Harvest rain caused some delays and extending harvest beyond the average.
Storm frequency was below average in 2022. The number of days producing active weather was below average for most provinces. With the record coverage, the cost per claim quickly built like the clouds that cause the hail. What appears to have been an average season for storms and claims endured record high claim payments.
Manitoba’s average claim was 20 percent higher than the 5-year average. Saskatchewan’s average claim was 45 percent higher and Alberta was 41 percent higher.
2022 received fewer than average storm days throughout the summer, but the cost per claim made up for the decrease in storm days. June was the only month that provided more storm day activity than the average across much of the prairies. With June more active than normal, the year overall ended up with about 20 percent less active days from the 5-year average.
Hardest hit was Alberta with an industry loss ratio of 98 percent compared to 2021’s 97 percent. Saskatchewan followed with a 68 percent loss ratio, compared to 133 percent in 2021. Manitoba reported a 43 percent loss ratio compared to 21 percent in 2021.
The Canadian prairie storm season runs June through October. This year July, August, and September saw reduced storm activity. Though claim day activity for the year saw a decrease, the 5-year average for claim frequency, or number of claims to policy, saw an increase of 28 percent – meaning more claims were filed with limited storms.
Alberta crop hail results continue to be clouded with storm activity
Alberta’s storm activity resulted in heavier-than-average loss expense for the industry. The claim-to-policy ratio was 18 percent above the 5-year average. Average cost per claim saw an increase of more than 41 percent of the 5-year average. More than $94 million was paid out to Alberta producers in hail claims.
Total sums insured saw 14 percent increase from 2021, with average rates charged reporting a slight increase likely due to industry results.
Saskatchewan records average hail loss year
2022 was a below average loss year for Saskatchewan based on cost of losses to sums insured. However, the loss results show a different story with an average paid loss ratio of 68 percent. The claim to policy ratio was 36 percent higher than average, and average claim paid 45 percent higher than average, resulting in $143 million being paid to producers.
Total sums insured saw a 26 percent increase year-over-year, likely due to the increase crop prices and cost related to inputs.
The industry average rate charged appears to have reached its lowest historic point last year. A small increase was realized in the 2022 year.
Manitoba records positive results despite the late start to the season.
Seeding was later than normal due a very wet spring. Saturated soils delayed seeding by up to 4 weeks in areas. A warm moderate summer followed in July, allowing crops to nearly catch up to normal development. A later harvest with a few rain delays led to an extended harvest.
Manitoba’s hail season saw below average hail activity. Like the other provinces however average cost per claim was higher than the 5-year average. The combination of lighter activity and increased cost per claim provided a higher-than-average loss ratio at 43 percent, resulting in $31 million being paid to producers.
Manitoba’s most expensive storm occurred in the southwest corner on Aug. 23.
Total sums insured saw an increase of over 25 percent from 2021 with average rates mostly remaining flat.