Financial returns for crop insurers have fallen nearly 60 percent below expectations since 2011, according to the National Crop Insurance Services (NCIS).\u00a0 The Standard Reinsurance Agreement \u2014 the business contract between the federal government and private-sector insurers that went into effect in 2011 \u2014 targeted average returns on retained premium of 14.5 percent.\u00a0 Returns on retained premium have averaged only six percent over the four-year period.<\/p>\n
And because these calculations only measure gross revenue, not net profit, the actual financial pain has been far greater, said NCIS Chairman Tim Weber. When expenses are subtracted from gross revenue, average net profit since 2011 has been less than one percent, with the industry experiencing negative returns in 2012.<\/p>\n
\u201cThis falls well short of the averages for other lines of property and casualty insurance,\u201d Weber noted during a recent speech at the industry\u2019s annual convention.<\/p>\n
Weber explained that unexpected premium reductions implemented by the U.S. Department of Agriculture (USDA) in 2012, $600 million a year in reduced funding under the current SRA, increased regulatory burdens, falling crop prices, and bad weather have caused the poor financial performance.<\/p>\n
The worst year, 2012, saw companies absorb $1.3 billion in underwriting losses when premiums collected failed to cover indemnities paid out during the record drought. \u201cCompanies need to make a reasonable return on their investment to stay in business…and we cannot do it for free, or worse yet, a negative return,” Weber said.<\/p>\n
Crop insurers at the convention expressed disappointment in recent remarks by the Agriculture Secretary, who misinformed reporters about industry returns while advocating for additional funding cuts.<\/p>\n
\u201cOne of those reforms would be to take a look at what the average rate of return is on crop insurance.\u00a0\u00a0Today it\u2019s roughly 14 [to] 15 percent on average of return on investment,\u201d Secretary Tom Vilsack said during an interview with Politico<\/em>.<\/p>\n \u201cThe Secretary is pointing to revenue projected by the USDA, not what has actually materialized in the marketplace,\u201d noted Tom Zacharias, president of NCIS.<\/p>\n","protected":false},"excerpt":{"rendered":" Financial returns for crop insurers have fallen nearly 60 percent below expectations since 2011, according to the National Crop Insurance Services (NCIS).\u00a0 The Standard Reinsurance Agreement \u2014 the business contract […]<\/p>\n","protected":false},"author":22,"featured_media":6011,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,25],"tags":[],"class_list":["post-5958","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-insight","category-whats-cropping-up"],"yoast_head":"\n