WASHIGNTON, DC (December 5, 2023) – The following statement reflects the views of the Crop Insurance and Reinsurance Bureau, National Crop Insurance Services, and American Association of Crop Insurers:
“The U.S. Government Accountability Office’s (GAO) recently released report is fraught with recommendations that would dismantle the successful public-private partnership that delivers federal crop insurance to America’s hard working farmers and ranchers.
The report contains several recommendations that in the long run would result in reduced participation, diminish the financial soundness of the current program, and reduce the effectiveness of the private-sector delivery system. America’s crop insurers work in partnership with USDA to provide insurance coverage on approximately 500 million crop and rangeland acres and provided approximately $200 billion of financial protection in 2022 to America’s rural economy. This compares to 265 million acres in 2011 and $100 billion in financial protection for the same year.
The industry will continue to review the report, but a few observations are noteworthy at this juncture.
GAO mischaracterizes the economics of the delivery system when it states that “….the increase in crop prices did not increase the workload to sell and service the policy.” This statement ignores the fact that since 2011 the crop insurance industry has worked with USDA to implement both the 2014 and 2018 Farm Bills. Both of these pieces of legislation increased the availability of crop insurance products nationwide. New crop insurance products have since been developed along with specialty crop and livestock product expansion. The workload has, in fact, increased to meet the risk management needs of America’s farmers and ranchers.
The report further incorrectly conflates the Standard Reinsurance Agreement’s (SRA) target rate of return with GAO’s realized, market-based return. The SRA target rate of return is a gross revenue measure that excludes expenses. In contrast, GAO’s realized, market-based return is a net revenue measure that includes expenses. Because of this, the two measures are not directly comparable. A further concern is that GAO’s market-based return measures return relative to industry shareholder equity, whereas the SRA target rate of return measures return relative to industry premium volume. Again, the two measures are not directly comparable. Thus, GAO is making an apples to oranges comparison which does not accurately portray the risk borne by the private sector in delivery of the crop insurance program.
It is unfortunate that GAO focused solely on the “cost” side of the equation and missed the opportunity to address the value proposition that is the modern day crop insurance program and the number one priority of major farm and commodity groups in the upcoming Farm Bill.”
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About CIRB:
Founded in 1964 and headquartered on Capitol Hill, the Crop Insurance and Reinsurance Bureau
(CIRB) is proud to provide unparalleled advocacy, support, and membership services to the crop
insurance and reinsurance community. Today, CIRB members provide a vital component of the
farm safety net, writing policies in every state and providing billions of dollars in crop
protection. Learn more about us at www.cropinsurance.org. To learn more about CIRB’s work, or
to get involved, please contact CIRB staff.