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Agricultural News

A Done Deal- Standard Reinsurance Agreement Signed by Companies

Tue, 13 Jul 2010 16:49:20 CDT

A Done Deal- Standard Reinsurance Agreement Signed by Companies Each of the 16 private insurance companies who participated in the federal crop insurance program last year has signed their 2011 Standard Reinsurance Agreement with USDA. Agriculture Secretary Tom Vilsack says USDA's Risk Management Agency has received each signed agreement. The new SRA is projected to achieve six-billion dollars in savings over the next 10 years. Two-thirds of those savings will go toward paying down the federal deficit - while the remaining third will support high-priority risk management and conservation programs.

Secretary Vilsack says the new agreement will improve the farm safety net for producers by providing incentives for companies to sell policies in all areas so that farmers and ranchers across the country can access these critical risk management tools. The Secretary credited the efforts of the companies to negotiate a new agreement in good faith.

Each company will now submit its plan of operations - which is due no later than July 26th. In the meantime - RMA is granting conditional approval to these companies to participate in the program - including the renewals and writing of new fall crop business. The new agreement generally maintains the current Administrative and Operating subsidy structure - but removes the possibility of windfall government payments based on high commodity price spikes by limiting the level of A&O payments that the industry can receive.


Here are some of the details of the deal struck between USDA and the Crop Insurance Companies:

With the savings achieved through the new Standard Reinsurance Agreement - four-billion dollars will be used to reduce the national deficit. USDA says this is one of the first and most significant steps that a federal agency has achieved in reducing mandatory spending from the long-term federal deficit. The remaining two-billion will be used to strengthen successful, targeted risk management and conservation programs.

More specifically - those dollars will be used to release approved risk management products, such as the expansion of the Pasture, Rangeland, and Forage program; provide a performance discount or refund - which will reduce the cost of crop insurance for certain producers; increase Conservation Reserve Program acreage to the maximum authorized level; invest in new and amended Conservation Reserve Enhancement Program initiatives; and invest in CRP monitoring.

The 2008 Farm Bill authorized RMA to renegotiate the agreement. Due to significant increases in commodity prices in recent years - annual insurance industry payments more than doubled from 1.8-billion dollars in 2006 to an estimated 3.8-billion in 2009 based on the terms of the previous SRA. Meanwhile - the number of total policies decreased.

For more details, here is the USDA News Release from Tuesday afternoon.



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