The commercial agriculture sector was no exception when it came to facing challenges during this hard market cycle, but brokers have managed to find innovative solutions to handle issues like limited capacity.
“In 2019, we started noticing significant reduction of capacity for property and business interruption coverage, which are key for these clients,” Steve Moreau, managing partner and national practice leader for agriculture at BFL Canada told Insurance Business.
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Insurers who were familiar with agriculture business, such as Lloyd’s of London, have taken a much more proactive approach to business in this space over the past few years, according to Moreau.
“Lloyd’s increased their internal audit process vigorously, so syndicates that were going through audits were told that the capacity provided was eliminated or significantly limited,” he explained.
Brokers struggled to manage large property risks (among other things) for these clients as insurers tightened up their underwriting guidelines and capacity allocation.
“[Brokers] also struggled to provide the pricing clients were accustomed to [in excess layers] because they’re in a more precarious position in the event of a claim,” Abe Herbst, agriculture unit leader at BFL Canada added.
Exclusionary trends for glyphosate and cyber were major liabilities that brokers had to deal with on top of premium rate increases, but the market is starting to “flatten out”.
“We’re seeing less significant increases, but brokers should continue communicating with clients transparently,” Moreau mentioned. “We’re starting renewal strategy meetings much earlier than usual, so brokers are able to make the best decisions for their clients’ businesses.”
Building trust with clients in the commercial agriculture space is essential. Insurers have seen an influx in submissions and slowed down their responses to questions that require increased attention.
“It’s important to keep clients up to date as to where they are in the process and when they can expect quotes,” said Moreau. “Our key role as brokers and risk advisors is to eliminate surprises.”
BFL has also made a commitment when it comes to loss control, providing quality advice for clients and managing risks in a comprehensive way.
“Our risk engineers use tools such as BFL’s agriculture risk map audit, which gives clients confidence about where they are positioned or information on how to improve their risk profile,” Moreau said. “That tool has attracted new capacity because underwriters have some comfort in our ability to essentially pre-underwrite business.”
“Brokers have prioritized and enhanced communication strategies with these clients to not only have competitive rates, but to foster capacity to cover businesses properly,” Herbst emphasised.
Underwriters tend to look at these clients as standard risks, but Moreau noted that risk control in the agriculture space has evolved.
“We have segregated clients into highly specialized insurance programs based on specific risk profiles,” Moreau continued. “We have also considered alternative risk financing solutions such as captives so commercial agriculture accounts have better control of their costs.”
Alternative solutions like captives will likely be a trend that stays for a little while as the hard market cycle slows down. “Even though the market is settling down, it’s a great time to get into the captive space and gain some control back,” said Moreau.
