2020 Standard Reinsurance Agreement

This report examines the costs of the Confederation`s crop insurance, the SRA that came into force for the 2010 reinsurance exercise and issues related to the renegotiation of the SRA. Although Congress did not directly approve a new agreement, Congress was interested in the SRA negotiations from a prudential point of view, particularly with regard to cost-effectiveness and changes that might affect farmers` participation. Insurance coverage or industry interest in selling crop insurance to farmers3 Another congressional concern was how cuts in crop insurance spending due to a new SRA could affect the core expenses used to determine the financing of the next farm bill4 The terms of the SRA can be renegotiated every five years that began with the 2011 reinsurance year. The Agriculture Act of 2014 requires that any future renegotiated SRA be budget-neutral, with Congress` intention not to reduce or reduce the funds available for reinsurance and reimbursement of administrative and operating costs for program implementation, unless approved by the Federal Crop Insurance Act. The Standard Reinsurance Agreement is a cooperative financial agreement between FCIC and each of the licensed crop insurance companies to enter into eligible crop insurance contracts. It comes into force with the execution and approval by FCIC of the company`s operating plan for each reinsurance year. Withholding, as applicable to final net losses, net accounting premium or business book, means the remaining liability for final net losses and the right to net accounting premiums after reinsurance transferred to FCIC under this Agreement. As provided for in the Agriculture Act of 2008, the USDA began renegotiating the FSA founded in 2004 in late 2009. On July 13, 2010, the USDA announced that all licensed crop insurance companies had signed the new SRA covering crops with a policy deadline after July 1, 2010 (for example. B corn from 2011). Before and during the negotiations, some had criticized the former SRA as too generous for insurance companies, after a significant increase in public costs in recent years. Although Congress does not directly approve a new agreement, Congress has been interested in its oversight capacity, including the cost-effectiveness and impact on farmers` participation, the sale and maintenance of crop insurance products to farmers by industry, and the amount of base funding for the next agricultural bill.

National Crop Insurance Services, Inc., "Response to the Risk Management Agency`s Draft Standard Reinsurance AgreementIssued on December 4, 2009," Overland Park, KS, January 20, 2010, www.ag-risk.org/. See also National Crop Insurance Services, "Fundamental Problems Exist with the USDA`s Proposed 2011 Standard Reinsurance Agreement," news release, January 20, 2010, www.ag-risk.org/PressRel/2010/NCIS01202010.htm. See also Keith Collins` comments on FarmPolicy.com published on February 2, 2010. The Standard Reinsurance Agreement (SRA) is a cooperative financial agreement between the FCIC and each of the licensed insurance companies called AIPs to provide eligible crop insurance contracts to farmers and ranchers. It establishes and regulates the commercial and financial relations between FCIC and AIPS, including the conditions under which the FCIC assumes reimbursement of administrative and operational costs and reinsurance for eligible contracts sold by AIPS. The CBO`s base budget estimates will serve as an official reference to assess the budgetary impact of the next agricultural bill. (The March 2007 CBO database was used to assess the 2008 agricultural bill.) CBO`s baseline projections generally rely on the continuation of the current farm accounting policy under expected economic conditions, as well as ongoing rules and administrative changes. In the last CBO baseline (March 2010), crop insurance spending in the 2011-GJ2020 GJ was $77.2 billion. . . .