Thanks to historic high temperatures and subsequent droughts, the underwriting performance for crop insurance is all but certain to deteriorate in 2012, according to Fitch. The magnitude of the losses suffered are hard to predict because of the complexity of the product line, however after federal and private reinsurance, the losses “are anticipated to have more of an impact on earnings rather than capital.”

Fitch expects the largest crop insurers to absorb these near-term losses and maintain financial strength due to “primary writers' size, diverse portfolios, conservative use of additional reinsurance, and the business line's historical profitability.”

The public companies with the largest market share in this line based on 2011 direct premium written include ACE Limited (issuer default rating [IDR] of 'A+'), QBE Insurance Group Limited (IDR of 'A'), Wells Fargo & Co. (IDR of 'AA-'), American Financial Group, Inc. (IDR of 'A-'), Allianz Insurance Group (IDR of 'AA-'), and Endurance Specialty Holdings (IDR of 'A-'). Endurance has the greatest amount of crop insurance as a percentage of its total book at roughly 25 percent of net premium written, according to Fitch.

The primary companies typically diversify crop protection geographically throughout the United States as well as by crop within the business line; Fitch asserts that this reduces the risk of exposure to a single event or a heavy accumulation of losses in any one region. Companies also typically purchase private reinsurance, on top of the reinsurance protection provided by the government, to avoid large net losses

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