New Illinois law allows capped insurance coverage for farmers

A new Illinois law allows insurance companies to offer capped insurance coverage to farmers.

Gov. J.B. Pritzker on Friday signed legislation aimed at preserving farm mutual insurance companies' ability to offer plans covering damage from extreme weather like tornadoes, wind storms and hail. 

Forty-four farm mutual insurance companies in the state offer coverage to more than 50,000 farmers and property owners in rural areas. The companies are typically small, local insurers, and can’t afford catastrophic coverage without reinsurance from a larger corporation.

The new legislation, which lawmakers passed with no opposition during the fall session, requires that insurance companies maintain reinsurance that is "adequate" rather than "unlimited."

Reinsurance is basically insurance for insurance companies. It allows insurers to transfer some or all of the risk of the policies they underwrite onto another company.  

Before, Illinois law required that catastrophic reinsurance policies have no caps on claims made. With insurance claims rising, many in the reinsurance market are no longer willing to accept that amount of risk. 

Under the new law, “adequate” coverage means enough to cover damage expected from a 500-year weather event.

He said the “adequate” coverage requirement brings Illinois in line with many nearby states.

Lawmakers gave the bill unanimous support as it went through the legislature.

The law took effect immediately. It contains a five-year sunset provision, meaning that lawmakers will eventually have to revisit the changes. 



(AP Photo Joshua A. Bickel)