Katrina Claims Cost Miss. Farm Bureau Mutual Insurance $450M; Policies Being Transferred to S. Farm Bureau Casualty

Jackson-based Mississippi Farm Bureau Mutual Insurance has announced that the strain of paying $450 million in claims after Hurricane Katrina has caused the company to cease writing policies in the state and transfer current policies to the Southern Farm Bureau Casualty Co.

In early December, 240,000 policyholders will be offered the chance to switch their insurance to Southern Farm Bureau Casualty.

According to David Waide, MFB president, all policyholders’ interests will be protected in this process. He said the mutual will be dissolved in 18 to 24 months.

He said customers should be able to continue their current coverage from all their policies. The change will not affect the company’s 350 employees.

Private insurance claims for Katrina have reached $3.6 billion in Mississippi. About $1.3 billion of that is in the coastal Harrison, Jackson and Hancock counties.

Mississippi Farm Bureau, the second-largest insurer behind State Farm, has paid 730,000 claims.

“We intend to maintain that market share even after Katrina,” Waide told the Jackson Clarion-Ledger.

Mississippi Insurance Commissioner George Dale said larger multi-state firms have more customers to absorb the impact of Katrina. He said the company’s largest loss before Katrina was $30 million from Hurricane Georges in 1998.

“This is a (Jackson) Mississippi-based company,” Dale said. “The pressure on them is they do not have premiums in other states.”

The Farm Bureau owns both mutual insurance and casualty insurance companies. The difference between the two is in financial structure.

Mississippi Farm Bureau Mutual, founded in 1952, was owned by policyholders, while the Southern Farm Bureau Casualty Insurance, founded in 1987, is privately held.

Sandersville resident Sue Windham told the Clarion-Ledger she doesn’t care, as long as her insurance stays with Mississippi Farm Bureau. Her house burned 25 years ago and she received the $330,000 outlined in her policy.

“They paid us in full,” she said. “I’ve never had a problem with them.”

Claims filed on the mutual insurance company will continue to be honored, Waide said.

“This decision started on Aug. 29,” he said of the date Katrina slammed into the state. “We knew it was devastating.”

About a month ago, officials realized the company did not have the money to continue paying claims itself.

To pay those claims, the Farm Bureau Mutual would have had to borrow $250 million at a 6 percent interest rate, Waide said. That would have cost policyholders $15 million.

“We have different sources of money,” he said. “We’re just capitalizing on the Farm Bureau family.”

Waide said the bureau’s casualty insurance company will stop coverage for wind damage south of I-10.

Dale said it was “too early to be making plans about what these companies will do in the future.”

But insurers may change their practices in the state, he said.

“I will not be surprised to see other companies’ revise their exposure in Mississippi based on Katrina,” Dale concluded.