Jefferson City, Mo. - Many insurance companies that provide property coverage to rural Missourians will be financially stronger because of a new reinsurance requirement put in place by the Missouri Department of Insurance. Missouri mutual insurance companies are generally nonprofit cooperatives that provide coverage for homes and businesses in much of rural Missouri. Missouri mutuals, also known as farm mutuals, will soon improve their ability to pay claims after catastrophic events.

A new state regulation requires each farm mutual to carry enough reinsurance that future losses would not deplete its surplus by more than 20 percent in one year. The change was made after a large farm mutual in southwest Missouri suffered significant financial stress after claims from the Joplin tornado of May 2011.

"Regulators and insurance industry groups teamed up to strengthen this regulation, which was vitally needed," said John M. Huff, director of the Missouri Department of Insurance. "This new requirement prevents farm mutuals from taking on more risk than they can handle. That protects their customers, who are mainly rural Missourians."

Huff says farm mutuals play a key role in Missouri's insurance market. In general, the companies serve a rural customer base that often has difficulty finding property coverage from traditional property and casualty insurers.

The new regulation takes effect Jan. 1, 2013. It was supported by the Missouri Insurance Coalition, the Missouri Association of Mutual Insurance Companies and the National Association of Mutual Insurance Companies.