THE FOLLOWING RELEASE IS FROM STATE SENATOR PAUL FARACI’S OFFICE
SPRINGFIELD — Legislation changing the minimum amount of coverage farm mutual insurance companies are required to provide, supported by State Senator Paul Faraci, was signed into law Friday.
“Adequate reinsurance allows insurers to offer affordable premiums for farmers, making insurance coverage more accessible,” said Faraci (D-Champaign). “This will help our farmers fully invest in their operations without being burdened by excessively high insurance costs.”
Senate Bill 765 requires farm mutual insurance companies to have and maintain adequate catastrophic reinsurance, rather than unlimited catastrophic reinsurance—which limits the company’s exposure on any loss to 20% of its policyholders’ surplus. ACR provides coverage up to a predetermined limit, which allows the insurer to manage costs more effectively. UCR, on the other hand, can incur higher premiums due to the increased risk transferred to the reinsurer.
The Illinois Department of Insurance had previously interpreted the Farm Mutual Insurance Company Act as requiring unlimited catastrophic aggregate reinsurance coverage. This would have led to 44 farm mutual insurance companies in Illinois being unable to offer coverage this year under the requirement, potentially leaving over 51,000 policyholders uninsured. Under the new law, companies will allow broader access to reinsurance products and risk capital, helping to avoid disruptions in the farm mutual community. This will allow the marketplace to correct and set appropriate pricing for policyholders, ensuring farmers have access to coverage.
“Illinois relies on a stable agricultural sector for economic growth,” said Faraci. “By allowing farm mutual companies to provide ACR, more farmers will be able to insure their crops against potential losses, helping to prevent financial crises and agricultural disruption due to natural disasters.”
Senate Bill 765 was signed into law on Friday and goes into effect immediately.
Clinton Mora is a reporter for Trending Insurance News. He has previously worked for the Forbes. As a contributor to Trending Insurance News, Clinton covers emerging a wide range of property and casualty insurance related stories.