RLI Expands Into Crop Reinsurance

Copyright 2010 A.M. Best Company, Inc.All Rights Reserved BestWire

January 20, 2010 Wednesday 12:14 PM EST

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RLI Expands Into Crop Reinsurance

Meg Green

PEORIA, Ill.

RLI Corp., the specialty insurer that was originally launched in the 1960s to write replacement contact lens insurance, is adding yet another new line to its stable of niche products: quota-share reinsurance for crop insurance.

RLI entered into a two-year agreement, starting Jan. 1, to assume 6% of Producers Agricultural Insurance Co.'s multiperil crop and crop hail premium and exposure. Attempts to reach the company for additional comment were not immediately successful.

Amarillo, Texas-based ProAg, a subsidiary of CUNA Mutual, underwrote $592 million of crop insurance in 2008. It is the seventh-largest U.S. multiperil crop insurer, according to BestLink. Farmers buy crop insurance to protect against crop losses due to natural disasters and other perils.

Crop insurance is a market segment with "attractive fundamentals and returns uncorrelated to our current products, and this quota share reinsurance represents an ideal entry point," RLI Corp. President and Chief Executive Officer Jonathan E. Michael said in a statement.

The financial results of this agreement will begin to be recognized in the first quarter of 2010.

RLI has a history of entering niche markets.

Despite strong market competition in recent years, according to BestLink, RLI continues to demonstrate its ability to generate strong operating results through strict underwriting discipline, rate adequacy and diversified strategies that can focus on niche-related opportunities, providing insurance solutions to under-served markets in the ever-changing insurance landscape.

Over the past 10 years, RLI has outperformed the overall commercial casualty combined ratio composite by an average of 17.0 points, according to BestLink.

In 2008, the top five writers of multiperil crop insurance in the United States were Wells Fargo Insurance Group, with 16.9% market share; Ace INA Group, 16.9%; NAU Country Insurance Co., 10.9%; Great American Property & Casualty Insurance Group, 9.9%; and Allianz of America, 8.3%, according to BestLink.

RLI Group, which writes specialty property/casualty insurance, currently has a Best's Financial Strength Rating of A+ (Superior). Producers Agricultural Insurance Group currently has a Best's Financial Strength Rating of B++ (Good).

Shares of RLI (NYSE: RLI) were trading at $52 a share on the morning of Jan. 20, down 1.4% from the previous close.

</P>(By Meg Green, senior associate editor, BestWeek: [email protected])

January 21, 2010

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