Hail Claims Nearly Match Premiums

SASKATOON - Oct 19/07 - SNS -- Payments on hail insurance nearly matched claims paid this year, reports the Canadian Crop Hail Association.

Preliminary estimates from the member companies put total 2007 payments to producers at approximately CDN $208 million, just $3 million less than premiums collected.

In Alberta and Manitoba, considerably more money was paid than collected in premiums. In Saskatchewan, payouts were about 87% of premiums. After considering administration costs and the costs associated with adjusting damaged crops, money collected in premiums will not cover total costs in Saskatchewan.

These are cumulative numbers and the loss to payout ratio varies widely among the companies providing hail insurance. This is largely a factor of where the companies do business and where hailstorms hit this year, the association explained.

Hail claims prairie-wide total about 23,700. The number of claims was slightly above average in Saskatchewan, well above average in Manitoba and record high in Alberta. Average payments per claim were up in all three provinces contributing to the high level of payouts.

While many companies will be in a loss position for 2007, providing insurance is a long- term proposition where premiums need to balance the payouts and other costs over a number of years. The crop hail insurance industry is proud to play an important role in the stability of the agricultural economy.

The Canadian Crop Hail Association represents the companies that sell crop hail insurance to producers in Western Canada. The Hail Report was distributed every two weeks during the hail season. This is the final wrap-up report.

There have been just over 4,700 hail claims in Alberta, the highest ever. These are claims for hail insurance over and above crop insurance endorsements. Total payouts to Alberta producers are estimated at $60 million, which is 127% of the $47.4 million collected as premiums.

AFSC, Agriculture Financial Services Corporation, is the largest hail insurance provider in Alberta. Unlike other companies, their hail insurance coverage continues until October 30, so Alberta statistics could still be affected by a late season storm. As well, AFSC is still processing some claims.

The biggest storms for Alberta were all in July – July 15 in the Bowden area, July 24 in the area north and east of Strathmore, and July 30 east of Camrose.

At nearly 23,700, hail claims in Saskatchewan are higher than the five-year average, but lower than the total recorded in 2006. However, the average cost per claim has been rising. Total payouts this year are estimated at $115 million. The premiums paid by producers total roughly $132.5 million.

With an 87% loss to premium ratio, the industry overall will not cover all of its costs. However, results vary from one insurance provider to the next.

July was by far the heaviest month for damage with major storms on the 7th, 24th and 31st.

For the second year in a row, central Saskatchewan was the hardest hit by hail with many hail claims extending in a band from Kindersley on the west side of the province to Yorkton on the east.

Claims in Manitoba for 2007 total just shy of 5,000, which is very close to the record claim year experienced in 2000. Preliminary estimates put payout totals for Manitoba at roughly $33 million, while premiums collected from producers were roughly $31 million. Payments per claim were much higher than the previous five-year average.

The August 9 storm that hit the Grandview, Roblin, Gilbert Plains, Dauphin area was the biggest both in terms of claims generated and total losses.