Federal Crop Insurance Program

The Federal Crop Insurance Program is the world's largest public-private crop insurance scheme by liability. It goes back to the Federal Crop Insurance Act of 1938, passed after the Dust Bowl. The Federal Crop Insurance Corporation (FCIC) carries the risk; the Risk Management Agency (RMA), set up within USDA in 1996, runs it. The split is contractual. Approved Insurance Providers sell policies and adjust claims, but set neither the coverage nor the price: RMA publishes the rate, county by county and crop by crop. In exchange they sign the Standard Reinsurance Agreement (SRA), which shares underwriting gains and losses between them and the government, and they receive an administrative and operating (A&O) expense reimbursement. Two laws grew the program: the 1994 reform, which created catastrophic (CAT) coverage, and the Agricultural Risk Protection Act of 2000, which raised subsidies. Recent orders of magnitude, per farmdoc (2023): about $180 billion of liability a year, close to $18 billion of premium, $11.6 billion of subsidy in 2022. The government pays on average a little over 60% of the premium. For an underwriter, the point that matters is retention. The SRA leaves the company a share of the result by state and by fund, and the tail goes to the FCIC. 2012 proved it: an underwriting loss for the companies, but balance sheets held. Not to be confused with the ad hoc disaster aid Congress votes after a catastrophe, which is not insurance.