Crop insurance remains a stable ship in a sea of turbulence,according to industry officials.

The economy is in recession, industry subsidies were reducedthrough the 2008 federal farm bill and there are concerns thatfurther cuts in federal programs may occur this year. "However, theindustry is well capitalized and can pay claims in a timely way,"according to Robert Parkerson, president of National Crop InsuranceServices in Overland Park, Kans.

National Crop Insurance Services is a not-for-profitorganization representing the interests of crop insurancecompanies.

"The crop insurance industry is not in the condition of otherfinancial services firms," Mr. Parkerson added.

The industry is huge. There are approximately 12,000 licensedcrop insurance agents in the United States, and premiums grew byalmost one-third between 2007 and 2008.

Specifically, in 2007, agents wrote $6.6 billion in cropinsurance premium covering $67.3 billion in liability. In 2008,there was $9.9 billion written in crop insurance premium covering$89.9 billion in liability.

For 2007, indemnity payments on crop loss were $3.5 billion,giving the industry a loss ratio of 0.54. So far for 2008, $8.6billion has been paid in indemnities giving the industry a lossratio of 0.87, but that number is likely to grow as more losses arefinalized, industry officials said.

One of the industry issues is dealing with a proposed plan bythe Obama administration to look at the crop insurance program asone of the ways of reducing budget deficits. Other key industryissues include climate change proposals and the vagaries ofweather.

"We are very aware of it and its implications for cropinsurance," Mr. Parkerson said, referring to climate change. "Asclimate changes, premium rates will have to be adjusted to reflectchanges in risk," he said.

Moreover, initiatives to reduce climate change by curbing carbonemissions, for example, "open up a new demand for renewable energyand less carbon emissions," he added.

Specifically, the crop insurance industry is ready to introduceinsurance products for new crops that are tied to making ethanol orbiodiesel," he said. "We support the use of existing renewable fuelcrops, such as corn, and newer crops, such as switchgrass, and planto offer input to Congress as they deal with this emergingarea.

"These crops could also be used in electric generatingfacilities to replace fossil fuels and help ensure the supply ofenergy feed stocks," he said. "We are hoping to be players in thebusiness of reducing carbon emissions, and these are some of thethings we have suggested to officials at the U.S. Department ofAgriculture.

On the subject of premium subsidies, Mr. Parkerson said thatwhile it is likely that Congress will continue to take a hard lookat them, it is unlikely that Congress will approve wholesale cutsin crop insurance programs to finance other priorities.

"Congress knows that it has to be careful," he said. "They don'twant to undermine the financial strength of this industry so thatit will ultimately need a bailout. We don't want a bailout."

The issue came up because the 2008 Farm Bill made over 20 majorchanges to the program, marking the first time major amendments tothe Federal Crop Insurance Act were made in a farm bill since thecurrent federal-private program was instituted in 1980.

The 2008 Farm Bill also slashed the subsidies to be paid for theprogram by $6.4 billion over 10 years through reductions inpayments to the companies to deliver the program and otheradjustments.

But the recent budget plan adopted by Congress for 2010 did notcontain proposals supported by the Senate that would have takenfunds from the crop insurance budget and used them to fund morenutritional and food programs. "The Senate is still interested infunding more food and nutritional programs but is looking elsewherefor funding," Mr. Parkerson said.

At the same time, he acknowledged, the crop insurance industry"still believes we must defend our budget every year."

Pressing budget issues include calls by the Obamaadministration:

o To cut the crop insurance budget by reducing premium subsidiesby five percentage points on all coverage levels.

o To increase the government's share on underwriting gains to 20percent from 5 percent.

o To reduce premium on Catastrophic Crop Insurance (CAT) by 25percent and charge a sliding scale fee for CAT coverage from $300up to $5,000 depending on the crop value.

According to Mr. Parkerson, "The crop insurance industry opposedthose cuts when his budget proposal was announced in February, andwe still oppose those cuts."

"The 2008 Farm Bill made reductions in crop insurance by $6.4billion, and we feel that, in order to maintain the financialstability of the industry, further cuts should not be made," hesaid.

Addressing another concern of agents--possible automation of thecrop insurance program--Mr. Parkerson said the 16 companiesinvolved in providing crop insurance are very much aware of theimportant role that agents and adjusters play in placing businessand handling claims. Farmers' reliance on them limits the abilityto automate the sales and claims processes, he said.

"Nothing dramatic is going to happen with the use oftechnology," Mr. Parkerson said. "The program is far toocomplicated to be handled by technology alone," he said.

"Agents will work with farmers to tailor plans that meet each oftheir needs," he said.