NU Online News Service, Dec. 30, 10:47 a.m.EST

WASHINGTON–Proposed cuts in the crop insurance programare sending alarms through the insurance industry for bothunderwriters and agents.

Under a proposal unveiled earlier this month, the Obamaadministration wants new cutbacks in the program that in additionto other recent action, would collectively reduce governmentinvolvement in the program by close to 30 percent.

"We definitely cannot live, without a doubt, with what they havesuggested," said Robert Parkerson, president, National CropInsurance Services, the liaison to the U.S. Department ofAgriculture's Risk Management Agency (RMA). RMA represents the 16carriers that provide crop insurance to an estimated 270 millionacres of all crops grown in the U.S., an estimated 78 percent ofall tillable land. The group also helps develop policies, claimsprocedures, research on new plants and new genetic seed processingfor the agriculture industry.

"If this isn't resolved, we have a tremendous problem on ourhands, and so does the nation's farmers," Mr. Parkerson added.

Besides the cut in the program subsidy, the RMA is also raisingthe rates to the NCIS member companies for reinsurance, which couldjeopardize the solvency of the 16 NCIS companies that also purchaseit on the private market, Mr. Parkerson said.

"The current draft of the standard reinsurance agreement is outof touch with the reality of the costs necessary to keep the FCIP[Federal Crop Insurance Program] a viable safety net for America'sfarmers," added Charles Symington, senior vice president ofgovernment affairs for the Independent Insurance Agents and Brokersof America.

Their concerns stem from a proposal made within the last twoweeks by the RMA that would cut $4 billion over 5 years in the cropinsurance program. Last year, Mr. Parkerson said, crop insurers hada loss ratio of about 88 percent out of $9.8 billion in premiumspaid.

According to various officials, the Obama administration wantsto use the funding cuts from the crop program to increase theAgriculture department's child nutrition programs by at least $1billion a year over the next 5 years.

The child nutrition programs include the school lunch andbreakfast programs; the women, infants and children's specialnutrition program, or WIC; and commodity distribution programs.

Another concern is that the administration might be trying tolink the nutrition programs to the crop insurance programs,foreshadowing additional cuts, according to congressional staffersand lobbyists. They cannot be directly linked, these officials say,because Congress has no direct control over NCIS membercompanies.

The new $1 billion annual cut would be in addition to the $6.4billion cut in the program over 5 years negotiated in the 2008 farmbill, bringing total cuts over the last few years to 27percent.