by Patina Thompson
Standard Reinsurance Agreement Changes
It’s no surprise that the key term during the last year has been “recession”. Every newscast you hear mentions it, every Washing press conference dabbles in it, but while Washington is looking for ways to spend billions of dollars to create jobs and jump-start the economy, there is also a plan to cut millions of dollars in crop insurance that threatens the livelihood of rural Americans.
In communities across the nation, crop insurance provides jobs for thousands of men and women who sell and service the policies as well as the adjusters that work the claims. For the substantial losses farmers and livestock producers are faced with year-to-year, crop insurance provides valuable and affordable coverage in all regions.
The Federal Crop Insurance (Multi-Peril Crop Insurance Program or MPCI), is a public-private partnership between the United States Department of Agriculture’s (USDA) Federal Crop Insurance Corporation (FCIC) and private sector insurance companies, also known as Approved Insurance Providers (AIP’s).
The FCIC and AIP’s have a business relationship that is contractually defined by the terms of the Standard Reinsurance Agreement (SRA). According to the SRA, each year private insurance companies and their agents provide coverage to nearly 270 million acres and more than 100 different crops across the nation. On December 4, 2009, the draft SRA proposed funding cuts for delivery of insurance to farmers by roughly one-third. The administration also proposes deep cuts to the underwriting gains an insurance company can make in good years. The change would cut at least $4 billion out of crop insurance over the next five years.
A revised draft, released February 17, 2010 incorporated some changes that the crop insurance industry pushed. An open letter to USDA and members of Congress tried to balance the initial draft with comments and opinions from members across the nation. Regardless of which changes go through, they will no-doubt be debilitating to the future of crop insurance. Many section’s of the 2008 Farm Bill, which took a $6 billion cut to crop insurance, have yet to take effect.
It’s a shame that the agricultural industry continues to take a financial hit and that the money will not say in the rural communities that it was designed to serve.
Sources: Zeug, DeVonna, “Prevent gutting of crop insurance”, published Wednesday, January 6, 2010 in Omaha World Herald.
See the full report online at www.rma.usda.gov/news/2009/09/milliman.html. See additional information about RMA's proposals for the new SRA at http://www.rma.usda.gov/news/2009/12/sra.html.
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