The Importance of Crop Insurance in the United States Material prepared for the Senate Ag Committee Staff Briefing March 9, 2012 Contact: David Graves, ACCI Mike Torrey, CIRB

Evolution of U.S. Crop Insurance Federal Crop Insurance Act of 1980 Crop insurance to replace disaster assistance as the primary form of risk protection for producers Private sector to deliver program Government to pay company delivery expenses and premium subsidies to encourage participation 1994, Other key crop insurance legislation that expanded government support, provided new products, increased participation, improved program effectiveness

Important Farmer Benefits of Crop Insurance Helps Financial Stability Helps get and repay a loan Facilitates forward marketing

Overview of the Program Structure Government: FCIC, RMA-USDA Licensed agents and adjusters Approved crop insurance providers Farmers 18,000 agents & adjusters --sell and adjust losses --must sell to any farmer 15 companies --hire agents/adjusters --collect premiums --pay claims --bear underwriting risk 500 staff --set standards --approve new products --subsidize premiums --pay delivery costs --share in gains/losses 1.15 million policies in ,000+ agents, adjusters & company staff

Acres Enrolled in Crop Insurance Mil. acres

Total Value of Coverage Program Liability

Participation in U.S. Crop Insurance Acres enrolled, 1 dot=20,000 Premium by major crop: $11.9 bil.

Farmers Steadily Increasing Coverage Levels Share of Buy-up Premium at 75% or more

Coverage Level by Major Crop, 2011 Percent of Premium by Crop Coverage Level

Premium at High Coverage Levels Premium by Coverage Level, 2011 Percent of Total Premium Coverage LevelWheatRiceSoybeansCorn Up Cotton 85% % % %

Recap: Why Crop Insurance is Now Considered Essential 1--Producers share program cost 2--Producers take personal responsibility for risk management 3--Producers get individual risk management solutions 4--Producers receive indemnities in the timeliest way 5--Program can be quickly adjusted and is self-correcting 6--Payments are not in excess of losses on individual plans 7--Protection can be used as collateral for loans 8--Program helps in pre-harvest marketing 9--Producers not subject to payment limits which would reduce protection from losses 10--Producers benefit from the efficiencies of private sector delivery 11--Crop insurance has flexibility to meet WTO support limits