By Mark Brannon, Principal & Consulting Actuary

Farm mutual insurance companies in the Midwest—small, policyholder-owned entities serving rural communities—play a vital role in providing property and casualty (P&C) coverage for farm buildings, equipment, liability, and other non-crop assets. These mutuals, concentrated in states like Iowa, Illinois, and Minnesota, face unique vulnerabilities due to their limited scale and geographic focus on severe weather-prone areas. Reinsurance, which transfers catastrophic risks like tornadoes and floods to global players, is essential for their stability. As 2026 approaches, the reinsurance landscape continues to soften, offering cost relief after years of escalation, though climate-driven severe convective storms (SCS) remain a volatility factor.

Historically, Midwest farm mutuals have grappled with surging reinsurance costs. Catastrophic weather events, including SCS that ravaged the region in 2023 and 2024, drove loss ratios skyward, eroding surpluses and prompting consolidations or market exits among some carriers. For instance, mutuals posted collective underwriting losses exceeding $31 billion nationwide in 2022, with Midwest entities hit hardest by unprofitable P&C lines amid inflation in repair costs and dynamic storm patterns. By early 2025, reinsurance renewals reflected this strain, with attachments at lower layers rising and prices climbing 20-30% for property cat covers in wind-exposed zones. Farm mutuals, lacking diversification, retained more risk, straining their balance sheets.

The market has pivoted further toward buyer-friendliness since mid-2025. Global reinsurer capital swelled to a record $735 billion by June 2025, fueled by robust earnings, catastrophe bond issuance exceeding $17 billion in the first half, and alternative capital reaching $121 billion. This abundance has intensified competition, with reinsurers expanding appetites and offering innovative structures like aggregate and earnings protection covers, which saw 50% higher uptake in 2025.

For the January 2026 renewals, recent forecasts indicate deeper softening. Property catastrophe rates are projected to decline 10-15%, with most programs trading flat to down, driven by ample capacity and reinsurers’ double-digit ROEs projected to ease only slightly to the mid-teens. Hannover Re anticipates stable to slightly lower P&C pricing overall, with more capacity available if risk-adequate, while terms and conditions, including retentions, hold firm. Guy Carpenter and KBW describe an “orderly” environment, though top-layer pressure may arise from SCS frequency. Aon highlights robust demand for agriculture lines as a high-growth area, supporting proportional and facultative options for P&C cedants. Premium growth in U.S. farm P&C is pegged at 4-5%, with global cat limits rising another 5%.  Discussions with our clients and with reinsurance associates at the National Association of Mutual Insurance Companies (NAMIC) Annual Convention consistently confirmed this outlook for their companies and clients.

For Midwest farm mutuals, this translates to costs potentially dipping 10-15% from 2025 peaks, boosting availability and enabling limit expansions. Aggregate protections are resurging for U.S. programs, aiding volatility management. However, challenges persist: Climate change amplifies SCS—2025’s events exceeded $100 billion in global losses—potentially capping softening if hurricane activity spikes. Small mutuals should prioritize advanced risk modeling and diversification to achieve favorable terms.

In sum, 2026 offers a prime opportunity for resilience. By acquiring competitive reinsurance terms, Midwest farm mutuals can better shield policyholders from escalating perils, strengthening the sector’s position in a volatile agricultural landscape. Strategic early renewals will be key to navigating this transitional cycle.

If you would like to continue the conversation, get in touch with Principal & Consulting Actuary, Mark Brannon at mark.brannon@us.davies-group.com