Canada - Record crop insurance payouts in 2021 impact insurance fund reserve

12.01.2022 217 views

Taking into account the province-wide 2021 growing conditions across Alberta that challenged many producers, the value of Agri-Insurance programs will be impacted, as a large number of clients are triggering significant claims.

Agriculture Financial Services Corporation (AFSC) insurance indemnity payouts are predicted to be among the highest in its 80-year history, and a significant decrease in the fund reserve is expected.

While final indemnity payments won’t be known until all post-harvest inspections have been processed, current estimates indicate the Alberta Premium Reduction is no longer sustainable.

In the meantime, AFSC is focusing on completing post-harvest claims for clients who are feeding grain or didn’t receive an advance payment. On average, AFSC completes 3,600 post-harvest claims but, this year, it’s projected there will be up to 8,000. So far, 5,000 claims have been completed or are in progress and it is expected 75 to 80 per cent of clients will be in a production shortfall this year.

In 2021, the provincial and federal governments allocated $340 million for the AgriRecovery response to help cover extraordinary feed and water access costs being incurred by Alberta’s livestock producers. The 2021 Canada-Alberta Livestock Feed Assistance initiative includes two phases, an initial payment and a secondary payment. To date, AFSC has processed $176 million in payments for Phase one and Phase two applications are now open.

Combining the projected record claim payments from Agri-Insurance, and the payments from Agri-Recovery, AFSC is forecast to process over $3 billion in payments to Alberta producers.

An Insurance Crop Fund Reserve is in place to protect future insurance payments. In 2020, there was enough money in the fund to mitigate a potential major future event, and help clients with discounted premiums without posing significant risk to the overall program. However, the Alberta Premium Reduction was introduced in 2021, and saw Alberta farmers receive a 20 per cent reduction in crop insurance premiums for the 2021 crop year.

Now, taking into account the 2021 losses, a substantial decrease is expected in the fund reserve.

In the meantime, AFSC has several options for the client to receive funds for their crop production shortfall. Depending on the information provided by the client on their Harvested Production Report, one of the following options will be available:

— Advance payment options; provides clients with a portion of their claim on a crop-by-crop basis prior to an on-farm inspection; a post-harvest inspection will be completed on the farm later in the winter by an AFSC adjuster to finalize any previous payments. — Payment by Declaration; provides full payment based solely on the client’s reported information without an on-farm inspection.

To protect producers from negative crop conditions and production loss, AFSC offers a group of provides insurance programs, that provide protection from financial losses due to circumstances beyond their control.

Source - https://lethbridgenewsnow.com

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