NU Online News Service, June 15, 3:40 p.m. EDT

The federal government's $6 billion cut in the crop insurance program last week received a strongly negative response from the association representing the insurers.

The Overland Park, Kan.-based National Crop Insurance Services (NCIS) association, representing crop insurance companies expressed dismay over the cuts and promised to meet with company representatives to discuss the move.

"We negotiated this contract in good faith with USDA (Unites States Department of Agriculture) and we are frustrated that our concerns for the financial stability of this 30-year program were not adequately addressed," said Bob Parkerson, president of NCIS in a statement.

He said the industry is still dealing with $6.4 billion in cuts made in the 2008 Farm Bill, and wondered how the latest cuts would not seriously undermine the federal crop insurance program.

"Unfortunately, USDA seems to have lost sight that this program is in place to provide a sound financial risk management tool for America's farmers and ranchers," he said.

The USDA's Risk Management Agency, which administers the federal crop insurance program, released its final version of the new standards late last week. The department said the new agreement "will generally maintain the current Administrative and Operating (A&O) subsidy structure, but remove the possibility of windfall government payments based on high commodity price spikes by limiting the level of A&O payments that the industry can receive."

USDA said RMA lowered the projected long-term return for insurers to about 14.5 percent by modifying the terms under which RMA provides reinsurance.

Of the $6 billion in savings, $2 billion will be used to "strengthen successful, targeted risk management and conservation programs" and the remaining $4 billion will go to reduce the national deficit.

The NCIS said the USDA's financial terms are more complex than they would initially appear. The association was also critical of what it says were "significant terms" that appeared in the final draft that were not in earlier ones.

The Independent Insurance Agents & Brokers of America was equally critical of the USDA's decision.

Charles Symington, IIABA senior vice president of government affairs said the association does not believe the RMA's proposals reform the program "but rather needlessly weakens it and severely damages an aspect of the rural economy that currently provides tens of thousands of jobs."

The cuts, on top of a commission cap proposal, "will have a compromising and destabilizing effect on the program," on agents and eventually farmers and ranchers," he remarked.

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$6 Billion Crop Insurance Cut Gets Critical Review

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