MIDWEST GRAIN OPERATIONS SCRAMBLE TO FIND INSURANCE

WICHITA, Kan. - Insurance is getting harder to come by for farm supply
cooperatives and grain elevators in the Midwest, which face skyrocketing
premiums if they're lucky enough to find coverage.

All but one of the 10 insurance companies that wrote policies for grain
elevators in Kansas last year have left the state, said Tom Tunnell,
president of the Kansas Grain and Feed Association, the industry group
representing the state's elevators.

"It is a terrible crisis," Tunnell said.

Matt All, assistant insurance commissioner in Kansas, said it's not just
farmers in his state who are struggling to find property and casualty
insurance.

"All across the Midwest region, companies that write those policies are
having a hard time making a profit," All said. "Some are pulling out of the
market, some are using strict underwriting standards, and some are raising
rates."

Several factors -- including meager underwriting gains, investment losses
and availability of reinsurance -- have created what All calls "the perfect
storm," wreaking havoc on companies that write commercial policies.

"Our industry is being forced to pay premiums for property and casualty
that have increased 40 to 200 percent," Tunnell said, "and at the same time
coverage has been reduced."

Some in the insurance industry blame the Sept. 11 terrorist attacks, which
cost insurance underwriters billions. But an official of the Kansas Farmers
Service Association, which has written the majority of policies for the
state's grain elevators, said there's nothing new about poor profits at
insurance companies.

"This started long before the Sept. 11 deal," said Mike Schaffter, the
association's vice president of operations. "A lot of companies started
exiting this market, primarily because of weather-related losses."

Others blamed a rise in methamphetamine production in rural areas. Kansas
- -- a national leader in meth busts -- became a high-risk state for insurers
in part because of liability issues surrounding the theft of anhydrous
ammonia from grain elevators, Tunnell said. The farm chemical is used to
make meth.

The governor recently signed a bill granting elevators and other suppliers
immunity from injuries relating to thefts of the chemical, a move that
Tunnell hopes will reassure insurance companies.

But it may be more difficult to deal with rising fears that products
commonly supplied by rural farm cooperatives -- such as propane, gasoline
and various agricultural chemicals -- could be used as terrorist weapons.

Kansas Insurance Commissioner Kathleen Sebelius said Kansas and 45 other
states have terrorism exemptions in their insurance coverage, and she said
she has been working to get the word out that insurance companies cannot
use the fear of a potential attack to raise rates.

"It is a bogus response -- and we would like to know about it," Sebelius said.

Among those forced to deal with the insurance crisis early was the Farmers
Co-Op Equity elevator in Isabel, whose policy was canceled in December.

Elevator manager Charles Swayze said his insurance company, Farmland
Insurance, dropped him even though he hadn't had anything other than
weather-related claims in the past five years.

Schaffter, the elevator's insurance agent at the time, said the insurer
tightened its restrictions and the elevator was not "compliant with the
things they wanted done."

Swayze said some companies he contacted told him they would not insure him
unless he sold his propane business. One agent told him terrorists could
hijack his propane or fuel truck and smash it into a populated area.

"It seems nothing was really a problem until Sept. 11 and then everybody
blames everything on Sept. 11," Swayze said.

On the Net:

Kansas Grain and Feed Association: http://www.kansasag.org

Kansas Farmers Service Association: http://www.kfsa.com