All 16 private insurance companies who participated in the federal crop insurance program during the 2010 crop year have signed 2011 Standard Reinsurance Agreements with USDA’s Risk Management Agency, ending the negotiation process under way since December 2009.
USDA says the new SRA will save $6 billion over the next 10 years, two-thirds of which will go toward paying down the federal deficit while the remaining third will support high-priority risk management and conservation programs.
“The new agreement that we have now finalized lays the foundation for a more sustainable federal crop insurance program, reduces the federal deficit, and improves 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,” said Agriculture Secretary Tom Vilsack.
“USDA appreciates the efforts of the companies to negotiate a new agreement in good faith, with straightforward and constructive dialogue to develop an agreement that works for the companies, producers and taxpayers.”
The sixteen companies who have signed the SRA are:
Ace Property and Casualty Insurance Company
Agrinational Insurance Company
American Agri-Business Insurance Company
American Agricultural Insurance Company
Austin Mutual Insurance Company
Country Mutual Insurance Company
Farmers Mutual Hail Insurance Company of Iowa
Great American Insurance Company
Hudson Insurance Company
NAU Country Insurance Company
Occidental Fire and Casualty Company of North Carolina
Producers Agriculture Insurance Company
Rural Community Insurance Company
Stonington Insurance Company
John Deere Insurance Company
XL Reinsurance America, Inc.
RMA grants conditional approval to these companies to participate in the program, including the renewals and writing of new fall crop business, contingent upon receipt and final approval of each company’s plan of operations. The plan of operations from each company is due no later than July 26, 2010.
The 2008 farm bill authorized RMA to renegotiate the agreement effective for the 2011 crop year. Due to significant increases in commodity prices in recent years, annual insurance industry payments more than doubled from $1.8 billion 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 from 2006 to 2009.
In preparation for these negotiations, RMA contracted with an internationally known company, Milliman Inc., to review historical rates of return and determine a reasonable rate of return for the crop insurance industry. The Milliman analysis said that over the past 21 years, the crop insurance companies averaged a 17 percent return when the average reasonable rate for that period was 12.7 percent. (See the full report and additional information about the new SRA online at http://www.rma.usda.gov/news/2009/12/sra.html.)