The Potential for Scale and Sustainability in Weather Index Insurance

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Assessment
CASE STUDY 6
FORAGE RAINFALL PLAN IN ONTARIO, CANADA
Performance
Payouts
The programme can make significant payouts to forage producers, as the large variation in
the loss ratio shown in Table 17 demonstrates. In two of the past nine years, the
programme had loss ratios greater than 3.0, paying out more than C$1.9 million in 2001
and C$8.7 million in 2005. In 2008, the Forage Rainfall Plan paid C$64,000 on 34 claims,
compared with C$5.9 million on 909 claims in 2007, when 52 per cent of the programme
participants across the province received an indemnity.
Reception and adoption
On the whole, the Forage Rainfall Plan provides producers with an affordable means of
insuring forage crop losses against drought. It has been well received by Ontario producers
because of its:
• Convenience. Producers do not need to provide damage measures to make claims.
• Predictability. Clients can monitor rainfall measures online throughout the season and
calculate possible indemnities themselves.
• Timely indemnity payments. Growers who use their own forage can purchase
replacement forage quickly in the event of a loss and thus resume normal business.
Programme participation has increased every year. The number of acres insured has
increased from a mere 37,576 acres in 2000 to 448,794 acres in 2008. The number of
contracts sold doubled in 2004 after the Forage Rainfall Plan became a permanent
insurance programme in 2003. In 2008, the programme had almost 2,000 contracts,
generating a total premium of C$4 million. About a quarter of Ontario’s pasture and hay
lands were insured under the programme (Table 17).
Table 17: Forage Rainfall Plan summary (2000-2008)
Year Number of Acres Liability Total Total Claim rate Loss ratio
contracts insured (C$) premiums claims Total claims/ Total claims/
(C$) (C$) liability total premiums
2000 151 37 576 4 051 455 287 653 18 022 0.44% 0.06
2001 235 52 824 5 806 151 412 237 1 965 670 33.85% 4.77
2002 545 131 675 12 317 760 985 421 1 293 857 10.50% 1.31
2003 730 186 485 16 614 263 1 462 055 395 441 2.38% 0.27
2004 1 504 314 735 29 788 866 2 650 764 62 834 0.21% 0.02
2005 1 648 376 344 32 679 512 2 647 041 8 766 055 26.82% 3.31
2006 1 727 400 572 37 818 488 3 661 694 2 447 931 6.47% 0.67
2007 1 751 418 749 40 023 984 3 693 971 5 910 193 14.77% 1.60
2008 1 945 448 794 47 685 454 4 178 968 64 084 0.13% 0.02
Source: AgriCorp.