Climate risk has been in the news lately.
A board member of a major German insurance conglomerate, Allianz SE, warned in a dramatic March 25 LinkedIn post that extreme weather events are increasing due to climate change and that climate risk could end insurance altogether for many sectors.
While insurance premiums have been going up for rural infrastructure, so far they are not a major factor in rural land sales, according to Grant Fitzgerald. He is vice president of Farm and Ranch Management, leading insurance business lines strategies and annual business plans for Farmers National. The above photo of the center pivot from Pexel is by Refik Ekenal.
“The rural land buyer pool is not worried about interest rates or insurance premiums,” he said.
Fewer than 10% of farms have buildings on them. When rural land becomes less expensive, he said, the outside investors may enter the markets. But, in general, he said, most farm purchases still come from buyers who want to farm or who have some connection to the land. “The investor class fades away when land prices go up.”
However, insurance coverage on center pivot irrigation spray systems in particular has been steadily rising.
“There have been a lot of windstorms in recent years leading to pivot damage,” Fitzgerald told High Plains Journal. “In some regions, you might see 120 or 150 pivots flipping over after a wind event. That could lead to big losses in certain regions. Insurers have to buy you a new pivot if it’s seriously damaged.
One result, said Fitzgerald, is higher premiums for pivot coverage. In addition, fewer insurers are willing to write stand-alone policies for pivot irrigation systems. “They will package pivot insurance with other types of coverage for longer terms,” he said. “There are about half the number now writing stand-alone pivot insurance.”
The price of a standard pivot doubled during the COVID period, from around $60,000 to $120,000.”
Financers of pivot purchases require insurance, but “as the premiums are going up, the coverage is shrinking.”
When it comes to climate risks, he said, the biggest concern for producers remains, “How much corn can I grow?” He said this year profit potential remains greater for corn than soybeans.
David Murray can be reached at [email protected].
