TAILIEUCHUNG - Renegotiation of the Standard Reinsurance Agreement (SRA) for Federal Crop Insurance

Insurers anticipate this adverse job turnover dynamic. Nevertheless, insurers are expected to renew policies and may be reluctant or prohibited from increasing premiums rapidly. As a result, offered premiums for covering a previously uninsured firm are well above the initial expected costs for the firm’s worker’s current age and gender distributions. Such large premium loadings deter small firms from offering health insurance to their workers. A dynamic adverse selection problem emerges. Employers with favorable health risks are reluctant to offer insurance because the premium is too high to be attractive to the existing mix of employees. Furthermore, offering insurance may attract less healthy workers, worsening the expected. | Congressional Research K Service---- Renegotiation of the Standard Reinsurance Agreement SRA for Federal Crop Insurance Dennis A. Shields Specialist in Agricultural Policy August 12 2010 Congressional Research Service 7-5700 R40966 CRS Report for Congress------------- Prepared for Members and Committees of Congress Renegotiation of the Standard Reinsurance Agreement SRA for Federal Crop Insurance Summary Under the federal crop insurance program farmers can purchase crop insurance policies to manage financial risks associated with declines in crop yields and or revenue. The program covers more than 100 crops and is administered by the . Department of Agriculture s USDA s Risk Management Agency RMA which acts as both regulator and reinsurer. To encourage farmer participation and reduce the need for ad hoc disaster assistance the federal government subsidizes the purchase of crop insurance policies which are sold and serviced through 16 approved private insurance companies. Insurance company losses are reinsured by USDA and their administrative and operating A O costs are reimbursed by the government. A Standard Reinsurance Agreement SRA between USDA and the private companies spells out expense reimbursements and risk-sharing by the government including the terms under which the government provides subsidies and reinsurance . insurance for insurance companies on eligible crop insurance contracts sold or reinsured by insurance companies. As a result the SRA plays a central role in determining program costs. The SRA does not affect policy premiums paid by farmers which are based on RMA s estimates of risk and on subsides set in statute. As provided under the 2008 farm bill USDA in late 2009 began renegotiating the SRA established in 2004. On July 13 2010 USDA announced that all of the approved crop insurance companies had signed the new SRA which covers crops with policy closing dates after July 1 2010 . 2011-crop corn . Prior to and during the .

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• Forest Utilization
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