Standard Reinsurance Agreement Crop Insurance


April 12, 2021

Because A-O refunds are based on a percentage of premiums, the amount of the A-O refund has increased sharply in recent years, as premiums have increased to reflect higher crop prices. The repayment of A-Oas increased from an average of $881 million in 2004-FyG2006 to $1.6 billion in 2009, after reaching $1.3 billion in GJ2007 and $2.0 billion in GJ2008. RMA data also indicate that the A-O reimbursement per policy has more than doubled, from $750 in 2004-06 to $1,748 in 2008. Each year, ProAg and other licensed insurance providers (AIPs) enter into a contract with the Federal Crop Insurance Corporation (FCIC) to manage the Crop Insurance program through marketing, underwriting and claims adjustment for Crop Insurance Policen. Insurers transmit data to the federal government. They are also responsible for training and monitoring officers and staff. Another theme is the overall demand for plant insurance and the combined effect of lower raw material prices and reduced acreage in 2009, which were followed by high prices and increased plantings over the previous year. The sector is drawing attention to these declines and prospects for an uncertain recovery in demand, with the fear that cost reimbursement is already declining, as well as the reductions prescribed in the 2008 farm accounts, even without changes to the SRA. Among the proposed changes to technical provisions, the ASA aims to make it more attractive for insurance companies to provide crop insurance in higher-risk countries (usually outside the Maize Belt Member States) in 2011.

Commercial fund groups remain the same as in the second project, but risk-sharing conditions for higher-risk countries are modified to increase profit potential and reduce the share of losses. For the riskiest policies, the USDA also withdrew for each state (and for each company) from an assigned risk fund, so that companies could maintain protection against loss in the event of major disasters in different states, as provided for by the previous SRA. Finally, the share of net accounting quotas, which had been set at 10% in the first USDA project, would be set at 6.5% compared to the previous level of 5%. Under the final SRA, 1.5 percentage points of the net accounting quota would be distributed to companies operating in underserved states. The insured must document information relating to last year`s harvest during the production reporting period. It includes the area planted (planted area), harvested and each production assessed (due to a loss). The produced or productive quantity of a crop is called “actual production.” The production report (PR) must be reported to the agent until the production report date (PRD), usually 45 days after closing sales (SCD). The project also made substantial changes to the technical provisions of the insurance. First, the number of reinsurance funds under the project would decrease at the operational level. Under the proposed contract, companies would either pay the “residual fund” for riskier policies (as the insurance companies call them) or the “commercial” fund for less risky policies.

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