Private Market Balks at U.S. Crop Insurance/Reinsurance Changes
Some of the largest global insurers and reinsurers are battling changes that U.S. crop insurance program that would limit private market participation and cut government subsidies by as much as $2 billion.
The debate could come to a head today as the 2012 “Farm Bill” that would reauthorize sweeping U.S. agricultural programs is scheduled to come up for a vote by the U.S. Senate Tuesday afternoon, according to published reports.
But some of the larger global reinsurers and insurers are opposing the Farm Bill because of a key amendments that see to cut subsidies for crop insurance.
A proposed amendment by Senator Tom Coburn (R-Okla.) and Senator Dick Durbin (D-IL) to the bill would reduce annual crop insurance premium subsidies by 15 percent for any participant whose gross income exceeds $750,000. Currently, crop and revenue insurance premium subsidies in the crop insurance program are unlimited.
“This is a very modest proposal. We could have had an amendment that said, if you make over $750,000, we shouldn’t be subsidizing any of your crop insurance,” said Sen. Coburn before the Senate last week. “We would still have a crop insurance program for this very well-off 4% had we done that. What we said is now is the time to start looking at this.”
Other proposed amendments would reduce the subsidy to crop insurance companies for administrative and operating costs.
But private market insurers and reinsurers that issue the subsidized policies are fighting back at the changes.
“The Coburn-Durbin amendment harms crop insurance, and by extension, every farmer and rancher who participates in it,” according to a joint statement American Association of Crop Insurers and the Crop Insurance and Reinsurance Bureau. “By further weakening the country’s successful crop insurance infrastructure, such amendments would affect service, cost, and reliability of purchased private-sector policies.”
Members of the group include Partner Re, RenaissanceRe Syndicate 1458, Platinum Underwriters, Allianz and Munich Re.
Arguing that taxpayers have been supplementing large insurers and agribusiness through the crop insurance program, Coburn admitted that his amendment faces an uphill battle from the private market.
“This is a controversial amendment, we understand that. We know a lot of people are going to disagree with us,” he said in the Senate chamber last week. “But the point is, at how much income should you be able to make — should the average hardworking American still be paying taxes to supplement your income?”
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