Farm Mutual Act Changes from 2023

The Department’s bulletins regarding Public Act 103-0566, which changed the Farm Mutual Insurance Company Act. The Act made two large changes.

• First, farm mutuals converting from unlimited catastrophic reinsurance to adequate catastrophic reinsurance must tell their policyholders via notice on a form approved by the Director
• Adequate catastrophic reinsurance means reinsurance in an amount no less than that required for a 500 -year event, based on an actuarially sound catastrophe model that limits the company’s exposure on any one loss occurrence to either 20% of its policyholders’ surplus or an amount authorized by the Director.
• Second, a farm mutual must additionally have and maintain aggregate reinsurance coverage in an amount no less than that required for a 250-year event, based on an actuarially sound catastrophe model.
• The changes expire 5 years after effective date so 2028 (the bill passed late 2023).
• We will proactively collaborate to ensure that the changes do not sunset and revert to the unlimited aggregate reinsurance requirement.