It's becoming increasingly clear that severe drought in the US - which is presently devastating the country's corn and soyabean crop - will soon strike the insurance sector.
But the scale of the loss is still open to debate. Agricultural economists at the University of Illinois, for example, estimate that payouts could reach $30bn (£19bn) which, net of premiums and adjusted for estimated US government support of around $14bn, could leave insurers nursing a $4bn loss. Rating Agency Standard & Poor’s estimates a $5bn hit, while risk specialist AIR thinks the net figure is between $1bn and $3bn.
Whatever the loss, investors in UK-listed insurers shouldn’t panic. There’s "no material exposure expected for the UK stocks," thinks insurance analyst Nick Johnson of Numis Securities. In fact, the only UK underwriter to make mention of potential crop-related losses was Lloyd’s insurer Novae: "agriculture reinsurance showed a swing from a profit to a loss," reported the company at the half-year stage. But Novae’s loss is expected to be small.
