U.S. Crop Insurance, Reinsurance Battle Begins Again

U.S. Crop Insurance, Reinsurance Battle Begins Again

The U.S crop insurance and reinsurance program is facing further scrutiny as the Obama Administration has proposed $16 billion in cuts that private industry backers have vowed to fight during the coming months.

“If this was such a profitable business, you would see people coming in to it,” said Rep. Michael Conaway (R-Tx.) during a House Agriculture Committee meeting Wednesday “But people are getting out. Now is precisely the wrong time to modify crop insurance.”

In response to the statement, U.S. Agriculture Secretary Tom Vilsack said that the administration felt that some private market participants were making making much more than the 12 percent return on investment average cited by the Congressional Budget Office in recent report. “We can point to places where it was high as 18 percent,” Vilsack said, adding the the number “raised questions and concerns of the program.”

“This enterprise can be actuarially sound at 12 percent, over long term,” Vislack added.

President Obama’s 2016 budget released last week proposed reducing the government subsidy for “overly generous” crop insurance programs by several billion dollars over the next decade. The cuts come after a rancours battle last year about the crop insurance program’s future during the vote for the Agricultural Act of 2014.

“The Budget includes reforms that are designed to reduce the distorting aspects of the program while maintaining its place as an insurance program and a key component of the farm safety net,” the document states. “Specifically, the Budget proposes to reduce the subsidy for the premium on the harvest price protection revenue insurance, and tighten the prevented planting crop insurance rules saving an estimated $16 billion over 10 years.”

Representatives from the private market — the Crop Insurance and Reinsurance Bureau (CIRB) — shot back following the budget announcement in a letter to Congress arguing that the proposals would gut the program following “back-to-back years of wide scale natural disasters.”

“Budget levels currently in place for crop insurance ensure the affordability and availability of risk protection, while maintaining the viability of private-sector delivery,” the CIRB said. “Arbitrary funding reductions only weaken the system and ultimately shift risk exposure back to taxpayers.”


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