Private revenue insurance gains popularity

There’s a new kid on the block when it comes to income insurance for prairie grain producers. 


Global Ag Risk Solutions (GARS) is going into its third crop year with a production cost insurance program. 


Total liability was $75 million last year, and this year it’s aiming for $400 million. While that sounds significant, it wouldn’t take too many large farms to reach the goal.


Interest is increasing in this private revenue insurance as AgriStability scales back dramatically. 


Grant Kosior, one of the founders of Moose Jaw, Sask.-based GARS, says some large re-insurance companies are now backing the product, making it possible to sign up more growers. 


Grain farmers receive a quote for premiums based on their specific circumstances and financial records. At least five years of accrual financial statements are needed. 


The program covers farmers’ big three input costs: fertilizer, seed and chemicals. It calculates how much they’ve spent per acre in the past, but there’s a generous allowance for spending more with no additional premium cost. The coverage is based on what farmers actually spend on these input costs.


This is meant to encourage investments that will improve the overall return. If a hailed crop warrants a fungicide application to maximize the return, that’s good for the producer and it actually decreases GARS’s liability.


On top of the basic coverage for the big three inputs, a producer can also choose enhanced coverage in $25 per acre increments up to a maximum of $100.


Let’s say a farm’s basic coverage for input costs comes to $125 per acre. Enhanced coverage can take that up to as high as $225 an acre. Of course, the more enhanced coverage you choose, the higher the premium. 


The premium can vary dramatically between farms, so Kosior is hesitant to suggest specific numbers, saying instead that premiums are in roughly the same range as hail insurance premiums. 


Why spend extra money for GARS when you can buy crop insurance? 


Crop insurance provides little protection for a drop in grain prices. A 30 bushel per acre wheat crop may not trigger a crop insurance claim, but your gross revenue is only $150 an acre if the price drops to $5 per bushel. As well, crop insurance provides no protection for rising input costs.


Kosior advises producers enrolling in GARS to maintain a 50 or 60 percent crop insurance coverage level to maintain the Establishment Benefit and Unseeded Acreage Benefit. Insurance premiums go down dramatically at low levels of yield coverage. 


Kosior also acknowledges that producers who have a good-looking crop may want to buy hail insurance to protect their upside profit potential. Money paid in crop or hail insurance does not decrease a payment from GARS.


However, Kosior is not a fan of AgriStability. While it’s relatively cheap to stay enrolled, he believes there’s now a small likelihood of receiving any meaningful support. 


Another advantage he claims for GARS is that it’s bankable. Lending institutions should be able to use GARS as loan collateral, decreasing their need to tie up land.


Kosior has an ambitious plan to grow Global Ag Risk Solutions into a program with a $1 billion per year liability. If that kind of success is in the offing, other players may start offering copycat programs or a big company may come in and buy out the program. There’s lots of interest in how it all plays out.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.