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Last update: 10/04/15

USDA Delays Renegotiation of Crop Insurance Agreements

WWR -  01/10/03

Agriculture Secretary Ann Veneman has announced that the Risk Management Agency's (RMA) standard reinsurance agreement (SRA) will remain in effect for the 2004 reinsurance year. The SRA defines the terms of reinsurance between RMA and the companies participating in the crop insurance program. The crop insurance industry feared that the USDA, driven by OMB efforts to save money, was preparing to announce by the end of December that it planned on new negotiations for the 2004 insurance year, which would result in lower commissions. ICBA wrote Secretary Veneman asking for a delay in the renegotiations.

The Agricultural Risk Protection Act of 2000 permits the reinsurance agreements to be negotiated at the discretion of USDA once during the 2001 through 2005 reinsurance years. The renegotiated SRA then would be in effect indefinitely or until new legislation comes into force.

USDA agreed with several points made in ICBA's letter for deferring cancellation of the SRA until later, including the current unsettled nature of the industry given the failure of the largest company participating in the crop insurance program and the severe, lingering drought conditions in much of the U.S. USDA also said there is a growing recognition of the need to increase operational efficiencies within the companies and to reduce program costs.

"Deferring the negotiations will give all parties more time to evaluate ways to improve program effectiveness and to reinforce the strong foundation required for even more effective risk management in the future," stated Secretary Veneman. USDA plans to announce later this year that it will seek renegotiation of the SRA for the 2005 reinsurance year.

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