USDA working on a new agreement with crop insurance companies
Farm and Ranch December 8, 2009 USDA's Risk Management Agency, which administers the Federal crop insurance program, has released the first draft of a proposed new Standard Reinsurance Agreement. That’s an agreement between the Federal Crop Insurance Corporation and the crop insurance companies which deliver the program nationally. The 2008 Farm Bill authorized RMA to renegotiate the agreement which was last negotiated for 2005. RMA administrator Bill Murphy says the crop insurance program has changed dramatically over the last five to ten years. Murphy: “The underlying crop insurance program is performing quite well financially. We have been operating under a $1 loss ratio since 1995. What that means is that for every dollar a producer pays in premiums we have actually been paying out $1 or less since 1995. So as part of that we need to restructure the risk sharing provisions of the agreement. And another area we need to address is the increasing costs to deliver the program. Now this is two parts out of the current Standard Reinsurance Agreement. It is the administrative overhead expenses, or just the physical delivery of the program, and then these share arrangements, the underwriting gain or loss share arrangements with the private industry.” Murphy says those two costs have increased tremendously. Murphy: “Just since 2006 the combined cost to govern has increased from 1.8 billion dollars in 2006 to we are expecting 3.8 billion this year. Meanwhile, the number of policies have basically remained the same. So Congress I think, as well as the Administration, would like to reduce the cost to the taxpayer and the government overall.” I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on the Northwest Ag Information Network. ?
