2012 US drought

The 2012 drought is the heaviest loss in the history of the US federal crop insurance program. It hit the Corn Belt in July, right at corn pollination, with temperatures above 100°F and almost no rain. The national corn yield fell to around 123 bushels per acre, far below trend. By January 2013, more than $12.3 billion had already been paid, above the 2011 record ($10.8 billion). Final estimates run around $17 billion. The national loss ratio is estimated between 1.53 and 1.59, the highest since the 1993 floods. By state, Illinois reached 4.45 and Kentucky 3.32 on May 2013 data. For an underwriter, the striking feature is price mechanics. Revenue Protection policies revalue the guarantee at the harvest price. Corn went from about $5.68 a bushel in February to $7.50 in October. Yield losses were therefore paid at the high price, which inflated the bill. Approved insurers took their first underwriting loss since 2002. The SRA sent most of it back to the government, and the companies' private stop-loss treaties, attaching above their retentions, were hit. For cat modelers, 2012 set the benchmark for a year of near-perfect correlation between counties. Not to be confused with the 1988 drought, more severe agronomically but far less insured.