Crop insurance companies sign new deal with USDA

Farm and Ranch July 16, 2010 Agriculture Secretary Tom Vilsack predicted it;

Vilsack: “We believe the insurance companies are going to sign this agreement.”

And indeed all sixteen private crop insurance companies that are in the Federal Crop Insurance program have signed the new Standard Reinsurance Agreement even though it does cut six billion dollars in government payments to them and among other things imposes some new restrictions on agent commissions. However Vilsack says;

Vilsack: “The average return to companies from this agreement we calculate to be somewhere in the neighborhood of 14.5 %, which we believe is a fair and reasonable rate of return which maintains the stability of the system. It is slightly less than what it has been in the past on average but slightly more than what the industry has generally been recovering so we think it is a fair balance.”

The Secretary says the agreement should not bring higher premiums for farmers, should expand coverage, and frees up six billion dollars over the next ten years, four of which will go to deficit reduction, the rest to improve insurance and conservation programs.

Earlier this month sixteen Senators including the Chair and ranking member on the Senate Agriculture Committee had written Vilsack criticizing the six billion dollar reduction for crop insurance. One concern expressed was what that does to the CBO baseline of funding for the next farm bill. Committee Chair Blanche Lincoln had voiced support for increasing and improving crop insurance at her first hearing on the 2012 Farm Bill.

I’m Bob Hoff and that’s the Northwest Farm and Ranch Report on Northwest Aginfo Net.