This year's severe drought conditions will impact crop insurers' underwriting results but will not be the sole factors behind any rating actions, said rating agency Standard & Poor's Corp. in a report issued Tuesday.

In its report, New York-based S&P said it expects early estimates of insured losses to be more than $5 billion for private crop insurers and reinsurers if the 2012 drought is worse than the 1988 drought.

“Therefore, we expect that, with the exception of a few outliers, these losses will be contained within third-quarter 2012 results. Based on these early industry estimated insured losses, we don't expect to take any rating actions solely because of crop losses at this time.”

The report notes that crop insurers operate through the Multiple Peril Crop Insurance program administered by the U.S. Department of Agriculture's Risk Management Agency.

Results for specific companies will vary based on their geographic distribution and their use of government and private reinsurance, the report says.

“Underwriting losses will be a drag on earnings, but by themselves will not affect the capital of most insurers that we rate. Consequently, we do not expect to take any rating actions solely because of crop insurance losses.”

The S&P report says while the net loss ratio, before private reinsurance, retained by the insurance industry could exceed 120%, “such underwriting losses are manageable in the context of companies' capital levels and premium diversification.”

The S&P report, “Drought Will Hurt U.S. Crop Insurers, but Won't Dry Them Up Completely,” is available to subscribers of Ratings Direct at www.globalcreditportal.com.

Nonsubscribers may purchase a copy by calling 212-438-7280 or by sending an email to research_request@standardandpoors.com.Ratings.

A report issued Monday by Moody's Investors Service Inc. on crop insurers described the impact of the drought as a “credit negative.”

The Moody's report states the “more agriculturally focused and/or geographically concentrated insurers … appear considerably more vulnerable on a direct basis than their more diversified industry peers, which tend to be part of larger national and international insurance and financial groups.”

The Moody's' report, “Record U.S. Drought Is Credit Negative for Crop Insurers,” which is free to subscribers, is available for purchase here.