Two of the three prairie crop insurance programs will likely be making
claims with their insurance brokers this winter. That means higher
premiums for farmers next spring.
Preliminary estimates place the Saskatchewan and Alberta programs in
deficits, forcing them to tap provincial and federal government
reinsurance funds.
Insurance adjusters in Manitoba were slightly busier than usual this
year, but that province’s crop insurance program is still in the black.
Saskatchewan’s program is in the most trouble due to drought, hail and
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“We have been saying to both levels of government that provide the
reinsurance that $1 billion is not out of the realm of possibility,”
said Ken Svenson, manager of customer services with Saskatchewan Crop
Insurance Corp.
As of Dec. 2, the agency had paid $582 million on 94,251 pre- and
post-harvest claims and there are more to come. Less than half of the
post-harvest claims have been settled.
“Our record in the 40-year history is $466 million in 1998. So we’re in
for a big year,” said Svenson.
Payouts have already surpassed what was in reserves, what was collected
through premiums this year and what was sitting in the provincial and
federal reinsurance funds. Combined, the three sources of revenue
amounted to $532 million.
That means the two levels of government will have to top up their
reinsurance funds, a temporary loan that the crop insurance agency will
have to pay off through higher premiums starting next year.
“There is no question that it will have an effect on the premium.
Absolutely no question on that,” said Svenson.
“If we end up paying $630 million it’s not that big an impact. If we
end up paying $1 billion, it’s a fairly significant impact.”
Terry Hildebrandt, president of the Agricultural Producers Association
of Saskatchewan, said it’s not a good time to add costs to farms. He
said crop insurance has years to pay off the loans. It doesn’t have to
be done in 2003.
“I’ll tell you we’ll be looking into it and promoting the fact that
they do this as gradual as physically possible.”
The situation isn’t as clear in Alberta where crop insurance officials
are tight-lipped.
Agriculture Financial Services Corp., or AFSC, won’t divulge the amount
it has already paid out to farmers.
“I have clear instructions from our minister not to talk about those
yet until we actually have everything else sorted out,” said Merle
Jacobson, senior manager of crop insurance at AFSC.
He said adjusters are trying to calculate how many acres are snowed
under and what quality problems farmers face before AFCS makes its
numbers public later this month.
But there has been a hint that Alberta’s crop insurance program will
also be in a deficit. In October, the federal government estimated
total payouts in that province would reach $700 million.
Jacobson said then that the federal estimate could be low. He also told
The Western Producer that the program had a fund balance of about $600
million and if payouts exceeded $750 million, the reinsurance accounts
would be depleted.
Svenson’s words aren’t as comforting. But he agrees with Hildebrandt
that the government loans do not have to be paid back in one year, so
Saskatchewan farmers won’t be facing a doubling of costs when the new
premiums are set in February. And he doesn’t think any crops will be
cut from the program.
Hildebrandt wonders what effect rising premiums will have on future
producer participation in the crop insurance program.
He said he hopes premiums are at a level that producers can afford
proper coverage.
