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Faced with heightened climate risks and political uncertainties, insurers writing agribusiness and farm and ranch are deploying data analytics and technology as they grapple with a hard market and the need for greater transparency with their agricultural clients.

Insurers are turning to a variety of models for risk assessment and using the data to determine how to accurately assess and price risks in this asset-heavy industry, according to insurance professionals who specialize in agriculture.

“With wildfires obviously being all over the news and certainly being very prominent, a lot of insurance carriers are utilizing wildfire mapping and wildfire scoring systems to determine how likely or how probable [it is that] a certain location would be prone to wildfires,” said Chris Moore, president, EPIC Farm & Ranch.

While wildfires are most prevalent out West, mapping technologies indicate that Texas and Florida are also at risk for wildfires, making it a challenge to place coverage in those states, Moore said.

Carriers have become more cautious about insuring agribusiness in Midwest states heavily prone to severe winds and large windstorms.

“I think that derecho that took place in Iowa several years back made a lot of insurance companies take pause and reanalyze certain wind areas and how they need to map out potential wind severity,” Moore said.

As insurers tackle wildfires and extreme weather events, they’re also keeping a close eye on the uncertainty coming out of Washington, D.C.

“A change in administration can bring out exposures for our members,” said Jeff Gullickson, president, Western Growers Insurance Services. “Potential tariffs could impact their business; we’ve already seen a change in some markets as a result. There’s always a shortage of labor in specialty ag, and any sort of issues around that can impact the availability of that workforce.”

Gullickson said that a tariff in Canada, for example, could drive up the price of fertilizer in the U.S., creating an economic impact on the agriculture industry.

“If oil goes up, diesel goes up; tractors and trucks and transportation is all dependent on diesel,” Gullickson added. “So, for the business issues around agriculture, the political landscape can change those week to week.”

A new administration also brings fresh concerns over funding of the U.S. Department of Agriculture and crop insurance programs. The USDA plays a critical role in funding the ag industry, particularly after natural disasters. The USDA dispersed $161 billion in financial assistance to agricultural producers from 2019 through 2023, according to a recent U.S. Government Accountability Office report.

The Trump administration has already shown a willingness to cut spending in the department.

“The impact of uncertainty can delay farm expansion and crop decisions,” said Scott Tuxbury, EVP of Mountain States, XPT Specialty.

In contrast to the prior presidential administration, the White House will likely be less strict in enforcing environmental regulations, Tuxbury added. This could translate to less regulatory concern in the farming and ranching community.

Embracing technology

Insurance companies operating in the agriculture sector have turned to remote sensing, AI, and data analytics to improve risk assessment and claims processing.

“Insurers were early adapters of AI, and it is used extensively in the underwriting and pricing of farm accounts,” Tuxbury said. “Imagery plays a significant role in individual account underwriting and allows for a more specific risk assessment of properties and locations. The fact that the data is readily available will also be important for the claim processing.”

While such data exists, more can be done to share information with customers about what goes into individual pricing models. Insurers would create more trust with customers by being transparent with how they use data, he said.

“As an industry, I don’t think we do a very good job of explaining pricing or risk assessment to customers,” Tuxbury said. “It is important to help them understand the benefits from AI and remote sensing, in that they can have a direct impact on their pricing.”

Another way insurers can work with consumers is by sharing climate data they’ve accumulated over the years, according to Tuxbury. Insurers have been reluctant to share this data, which is primarily used for risk assessment, pricing, and risk concentration. Ag producers don’t generally have access to the data.

“If this data could be accessible to the ag producers, it could give them better insight on climate risk and help them to make better decisions to reduce their exposure to the risk,” Tuxbury said.

Other technologies have made their way to the agriculture industry in recent years, such as drones, telematics, and worker sensors.

In many cases the new technologies won’t impact the liability of the customer, Tuxbury said, but in certain cases they will. He pointed to the use of drones for more active activities, such as weed control (spraying) and fertilization, as an area where customers need to exercise discernment.

“This has presented significant liability exposure to those farmers and ranchers,” he said.

As for telematics, there can be a bit of hesitation to implement them in an auto fleet, but there’s direct evidence of the positive impact of telematics on fleet loss records and their claims, according to Gullickson.

Whenever data is being collected and shared, it’s vital the broker understands where that information is going, he said, noting the importance of “making sure that you understand as a broker the technology the client is using and the application and how they’re applying that, and are you looking at available coverages to help them with that.”

Hard Market Persists

Insurance brokers specializing in farm and ranch make it clear that market conditions are harder today than in recent years.

“We were in a risk-on environment and we were able to get insurance companies to attach to risk pretty easily,” Moore said. “Really over the past two years it’s been significantly more difficult to place property insurance. And I would say that statement is true across the entire country.”

Moore said reinsurance requirements are limiting how much risk insurance companies are able to take and pass on. Now if there’s too much risk at any one location or across the portfolio for an insurance company, there are more constraints around capacity, he said.

California, the largest food producer in the U.S., has fewer carriers who want to write agriculture in the state, said Gullickson, whose clients focus on specialty crops. There had been indication of softening in the California property market heading into the year, he said, but that was before the Los Angeles area wildfires.

“Obviously every broker out there is trying to put together property towers using multiple carriers to get coverage in place,” Gullickson said. “We’ve seen alternative funding options such as captives and parametrics. There’s some wildfire parametric coverage available.”

While parametric insurance has been a useful tool to address limitations of the current property insurance market, there’s a need for additional excess and surplus lines capacity, Moore said.

“If an account isn’t getting any offers from the standard market, I would say that there’s very few very excess of surplus line carriers that we can go to and that we can talk about the risk,” Moore said. “I understand that a lot of these companies avoid entering in this market space because it is a very niche area.

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