Drought hits Allied World with $40M in crop reinsurance-related losses

Severe drought conditions in the Midwest United States have caused an estimated $40 million of crop reinsurance-related losses.

Allied World Assurance Co. Holdings A.G. said Wednesday that it expects to record about $40 million of crop reinsurance-related losses in the third quarter as a result of the severe drought conditions in the Midwest United States.

“This amount is in addition to the company's anticipated losses and loss expenses for this line of business prior to onset of the drought,” said Zug, Switzerland-based Allied World in a statement.

Allied World added that it also expects to record $5 million to $10 million in losses and loss expenses in the quarter for Hurricane Isaac. The amounts are pretax and net of reinsurance recoverables.

Allied World said in the statement that its loss estimates for these matters are derived from preliminary information obtained from clients and brokers, a review of the terms of in-force policies and contracts, a review of outward reinsurance agreements and from its crop and catastrophe modeling analyses.

Allied World added that “actual ultimate losses may vary materially from the current estimates due to inherent uncertainties resulting from several factors, including the preliminary nature of loss data available, potential inaccuracies and inadequacies in the data that has been provided and the potential for crop and catastrophe modeling inaccuracies. In addition, ultimate losses on our crop reinsurance book can be materially impacted by finalized yield tallies and commodity price levels.”