NU Online News Service, July 2, 11:38 a.m. EDT
WASHINGTON–Crop insurers said late Thursday the industry and the crop insurance program will be able to "withstand" the severe cuts in subsidies imposed on the program by the Agriculture Department.
"Our hands are tied. The companies have no choice but to sign this new Standard Reinsurance Agreement," said Bob Parkerson, president of National Crop Insurance Services, which represents the 16 crop insurers involved in the program.
"If they don't, they cease operating and the safety net that America's farmers and ranchers rely on so heavily would be disrupted," he said.
He made his comments as QBE the Americas, a unit of an Australia-based company, disclosed that it has completed its previously announced acquisition of NAU Country Insurance Company. NAU is based in Ramsey, Minn.
QBE officials said NAU is the nation's third largest writer of Multi-Peril Crop Insurance (MPCI), a U.S. Department of Agriculture program that provides protection against weather-related and other unavoidable causes of crop loss. It is the major program whose subsidy is being slashed through the new USDA contract.
The company operates 10 offices across the U.S. and has more than 1,600 independent agents.
Mr. Parkerson joined independent insurance agents in criticizing the $6 billion over 10 years, or 30 percent, cut in federal subsidies ordered by the Risk Management Agency of the USDA.
The new contract imposes both a "hard" and "soft" cap on agent commissions. The USDA has ordered NCIS to sign the new contract by July 12.
Mr. Parkerson said crop insurers believe the negotiation process was generally handled reasonably well by USDA, "but there were terms and conditions added to the agreement very late in the process that gave companies very little time to react and negotiate a contract that was fair to all parties."
He also said, "Constraints on legal recourse of companies and agents are particularly problematic."
Mr. Parkerson contended, "I think our definition of 'negotiate' was very different from USDA's."
He added they made "a few concessions to some of the technical aspects of the agreement, but they didn't budge on the $600 million a year cut in funding, despite the damage it will do to the financial foundation of the program."
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