Crop Insurance Companies to Be Less Profitable

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While crazy weather may have folks crossing their fingers warding off hail, it looks like a hailstorm of sorts could be hitting your crop insurance company.

The USDA recently proposed slashing the federal funding that goes to crop-insurance companies by $6 billion over 10 years.  Reasons for the cut came from an August USDA report which found that the average rate of return on equity for these companies was around 17 percent between 1989 and 2008.  According to the administration, that number is higher than “reasonable.”  As a result, the government will adjust the subsidization of the system to bring that return down by at least 4 percent.

According to DTN, USDA Risk Management Agency Administrator Bill Murphy said today that his agency has sent crop insurance companies a revised final offer of a new standard reinsurance agreement. RMA gives the companies until July 12 to sign it.  The original deadline was today.

Murphy told reporters that he had made concessions to the companies on the structure of the agreement but did not made any changes in the proposal to cut $6 billion in the program or to put restrictions on agent commissions. The companies are expected to sign the agreement.

 

Posted by Haylie Shipp

 

 

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