This tax exemption, which is a somewhat unusual measure, in the sense that it's an exemption for insurance companies who provide a particular line of insurance, was introduced in 1954 in an effort to encourage the provision of insurance in what was seen to be an under-serviced market, that for farming and fishing property and businesses.
The government examined this measure as part of its review of tax expenditures and came to the view that it was difficult to say that this measure is effective and appropriate in today's economy, which has changed very significantly over the past 60 years.
A provision that insurance companies don't have to pay tax on a particular line of business is unusual in today's economy. Certainly the view is that the insurance market is now well developed and mature, and that with the sophistication of the Canadian financial sector, a broad range of both share companies and mutual companies is well placed to effectively write policies in the farm and fishing business.
The provision was seen to raise fairness issues with respect to other sectors, so the budget proposes to eliminate the measure.