Agricultural producers face liability risks generally experienced by most businesses – workers compensation, for example, and risks that can easily be covered by standard property and casualty insurance policies. However, agricultural growers and producers are also confronted with particular risks of losses and liabilities endemic to agriculture that go to the very heart of their businesses as farming operations. As those involved in agribusiness realize, standard property and casualty policies may not be available to provide coverage for the unique risks and potential losses an agricultural producer faces – losses attributable to:
- environmental matters;
- animal diseases;
- crop diseases;
- pesticides and fertilizers; and
- livestock and crop contamination, resulting in food borne illnesses for which there is liability and product recalls;
to name a few. Even if the commercial insurance is technically available, it is not available on practical terms because the premiums are so costly and the deductibles are so high the producers and growers cannot afford to pay them and still generate sufficient net income from their farming operations. Further, if and to the extent carriers are willing to write insurance policies for these unique agricultural risks, they are of little value because the policy exclusions leave uncovered many of the very risks of which the producer is most concerned and for which it needs the policy.
Many large agribusiness companies have addressed their risk management issues through the formation and operation of single parent captive insurance subsidiaries as referenced in a previous post. However, producers and growers have not embraced captive insurance despite the fact that it may represent a risk management tool tailor-made for the unique risks faced by crop growers as well as for the risks faced by livestock producers. Most give as their reason for not pursuing captive insurance their belief that implementing and operating a captive insurance company is too costly, too complicated and draws their attention away from their primary focus – growing and selling crops or livestock or operating their related businesses.
Continue Reading Captive Insurance Can Help Agribusinesses Come Rain or Shine (or Other Events Adversely Impacting Industry Participants)