Early indications show that the derecho that tore through several Midwest states Aug. 10 did heavy damage to crops and grain storage structures, with Iowa's corn and soybean industries taking an especially hard hit.

Diane Weidner, vice president for communications for Great American Insurance Group subsidiary American Financial Group Inc., said it will take several weeks for crop insurers to calculate the extent of the damage. She said in an email that the storm was "unique" in that it came when the corn crop was at a later stage of maturity and therefore more vulnerable to wind damage.

"What will be important is how well the crops can recover, and if farmers may still be able to get a combine under it," she said, adding that losses by insurers will vary based on the types of coverage offered to farmers and the locations of covered crops.

Iowa's Department of Agriculture and Land Stewardship reported that 57 counties containing about 14 million acres of insured crops were in the path of the storm, 8.2 million acres of corn and 5.6 million acres of soybeans. In northern Illinois, a report by DTN/The Progressive Farmer estimated that there were 6.95 million acres of corn and 5.82 million acres of soybeans in the storm's track.

The heaviest impact in Iowa was felt in 36 counties, affecting 3.57 million acres of corn and 2.5 million acres of soybeans, as well as grain bins that were storing "tens of millions of bushels of grain" that already had been harvested, said state Agriculture Secretary Mike Naig. He said in a release that he had been touring the hardest-hit areas in the week after the storm and found that both private and commercial farmers were anticipating a large harvest.

"Now their crops have been damaged, some destroyed ... just a few weeks before harvest begins," Naig said. "This is a devastating blow to the agricultural community that is still recovering from the pandemic."

There could be a high price to pay for insurers once damages are calculated, especially for the federal government. Samuel Funk, chief economist for the Iowa Farm Bureau, said 95% of corn and soy acres in the Hawkeye State are covered by federal crop insurance.

Funk said the language used by the U.S. Department of Agriculture's Risk Management Agency suggests that the derecho could be the largest single-day exposure in the history of federal crop insurance. He said federal insurance already was going to be important to farmers because of "price impact" and the ongoing drought.

"It's necessary for us to get really to the end of this year for an assessment," Funk said. "Some may harvest and actually have an above APH yield, but we would know they might not have reached the specific yield they expected prior to this event."

RBC Capital Markets analyst Mark Dwelle said the crop insurance line has been a pretty consistent double-digit ROE type business for companies like American International Group Inc. and Chubb Ltd.

"The business is reinsured," Dwelle said in an interview. "There's a portion that is reinsured through the government, but the company also would utilize reinsurance just for their own part of the account as well."

Dwelle said the formula for federal reinsurance is complicated, but, simply put, the larger the ultimate loss is, the more of it the government picks up. He said that when there are events like localized storms and floods, the government's percentage would be relatively low, but it would increase if an event is more widespread, such as a drought.

"The goal of the contracts is to kind of create a corridor of returns," Dwelle said. "When the years are good and there are light losses, the insurers cede the additional premium back to the government. They share the wealth when times are good and they share the pain when times are bad."

The derecho, which is defined as a widespread, long-lived wind storm with rapidly moving showers or thunderstorms, developed over South Dakota and northeast Nebraska overnight Aug. 9, then intensified the morning of Aug. 10.

Packing average winds of 70 to 90 mph and gusts over 100 mph, the storm swept through Iowa, northern Illinois and northern Indiana, moving 770 miles in 14 hours before weakening over northern Ohio later in the evening.