By William Nibbelin, Senior Research Actuary, Triple-I
The U.S. farmowners’ insurance industry is navigating a difficult period, recording its third consecutive underwriting loss in 2024, with a net combined ratio of 100.7. According to Triple-I’s latest Issues Brief, this is the line’s tenth underwriting loss in the past two decades and contrasts sharply with the broader property and casualty (P/C) industry.
Combined ratio is the most common measure of insurer underwriting profitability. It is calculated by dividing the sum of the claim-related losses and expenses by premium. A ratio over 100 indicates that the industry is paying out more than it is taking in. While struggling with profitability, the farmowners’ line is seeing significant growth. Premium increases have exceeded the rest of the P/C industry for six of the past ten years.
Defining the Farmowners’ Policy
A farmowners’ policy is a specialized hybrid. Designed primarily for smaller farms, it combines the standard protections of a homeowners’ policy with specific endorsements for agricultural risks like farm structures, heavy equipment, and livestock. Larger industrial agricultural operations use more complex commercial multiline coverage.
Predictors of Premium Hikes
Because farmowners’ insurance is so tied to physical equipment and buildings, certain economic markers serve as leading indicators for where premiums are headed:
- Machinery Repair Costs: The cost of commercial machinery maintenance has a massive 0.84 correlation with future premium changes.
- Building Materials: The cost of materials like lumber and steel also shows a near-identical correlation of 0.85, meaning when it gets more expensive to build a barn, insurance costs inevitably follow.
The Gap Between Home and Farm
Historically, farmowners’ and homeowners’ insurance moved in tandem, but that connection is fraying. One reason for this decoupling is that national homeowners’ carriers have become much more aggressive in implementing high deductibles and strict payment schedules for roofs.
Farmowners’ policies, which are often written by smaller, regional mutual companies, have not adopted these trends as quickly. Furthermore, farmers face a unique seasonal risk during the second quarter of the year, the peak for severe convective storms. For at least 20 years, the losses for farmowners during this “storm season” have consistently surpassed those of standard homeowners.
Assessing Frequency and Severity
Analyzing exactly how often claims occur (frequency) and how much they cost (severity) is difficult because farmowners’ data is often lumped in with homeowners’ data in public reporting. However, the financial health of the farm sector may serve as a proxy to fill the gaps.
- Frequency: A decline in a farm’s “working capital” often correlates with an increase in insurance claims, as a lack of cash can lead to the depreciation of equipment and structures.
- Severity: The cost of individual claims is heavily influenced by inflation. There is a very high correlation of 0.94 between the cost of manufacturing farm machinery and the rising severity of insurance claims.
A Concentrated Marketplace
The farmowners’ market is considered “highly concentrated” by Department of Justice standards. Nationally, just 25 insurance carriers write 80 percent of all farmowners’ premiums.
This concentration creates “insurance deserts” in some regions. Because standard policies were built for the row crops and houses of the Midwest, they don’t always fit other landscapes. In Hawaii, for example, the reliance on leased land and permanent tree crops means that not a single carrier writes a standard farmowners’ policy. Other areas, like Arkansas and Puerto Rico, have only one insurer currently offering this specific coverage.
As we move through 2026, these trends suggest a market that is highly sensitive to both the financial health of the American farmer and the increasing volatility of spring weather patterns.
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