Since its inception in 1938, the program has evolved from an ancillary program with low participation to a central pillar of federal support for agriculture. From 2007 to 2016, the total net cost of the federal crop insurance program was about $72 billion, of which $43 billion (60%) was of direct benefit to producers, $28 billion (39%) went to private insurers, and $754 million (1%) went to the Risk Management Agency (RMA) within the U.S. Department of Agriculture (USDA). 2 ), have proposed changes to the federal crop insurance program. Role of Crop Insurance in the Farm Bill

From 2007 to 2016, the federal crop insurance title had the second-largest outlays in the farm bill after nutrition. As such, it would continue to operate in the event that Congress does not enact a new farm bill, although farm bills have been vehicles for modifying the program in the past. Historically, the agricultural insurance market has been underdeveloped compared to other insurance markets. La ck of crop data and actuarially based rates . Production and price variations . Geographically correlated risks . Adverse selection refers to higher-risk farmers being more likely to purchase insurance than lower-risk farmers at the same premium rate. In 1936, on the heels of the Great Depression and the Dust Bowl, the President's Committee on Crop Insurance recommended a plan of "all-risk" (multiple-peril) crop insurance. In the early years of federal crop insurance, polices were available for only a few principal crops (mainly corn, barley, oats, sorghum, wheat, cotton, and rice) and in a limited number of counties. Participation

RMA reports that in 2015 the crop insurance program provided approximately $102.5 billion of insurance protection (liability) for over 100 crops (excluding hay, livestock, nursery, pasture, rangeland, and forage) on about 238 million acres, or 86% of eligible acres. Policy offerings and participation were much smaller for the livestock sector—$1.3 billion in liability for livestock (primarily cattle, swine, and dairy) on less than 3% of total eligible head or hundredweight. Total premium for crops (not including livestock and other policies) was about $9.8 billion with premium subsidies paid by FCIC amounting to about $6 billion. Program Operation and Finances

The federal crop insurance program is operated through public and private entities and is funded by both taxpayers and producers. Private insurance companies, known as Approved Insurance Providers (AIPs), are the primary insurers selling and servicing the insurance policies. 3. RMA drafts federal crop insurance policies, sets premium rates, and regulates AIPs. Standard Reinsurance Agreement (SRA)

The terms of the financial agreement between FCIC and AIPs are set out in a mutually negotiated document referred to as the Standard Reinsurance Agreement (SRA). Each AIP signs an SRA with FCIC every reinsurance year. (See " Delivery Expenses "). Given the program's significant cost and share of USDA program outlays, it is a frequent target for budgetary savings. Multiple bills introduced in the 115 th Congress would modify the main financial components of the program—premium subsidies, the division of underwriting gains and losses between FCIC and AIPs, and A&O and CAT LAE paid to AIPs. As with any large program, especially those with private sector involvement, congressional oversight has a significant role in ensuring that the federal crop insurance program meets its intended policy goals and operates efficiently.
Since its inception in 1938, the federal crop insurance program has evolved from an ancillary program with low participation to a central pillar of federal support for agriculture. From 2007 to 2016, the federal crop insurance title had the second-largest outlays in the farm bill after nutrition. The total net cost of the program for crop years 2007-2016 was about $72 billion, of which $43 billion (60%) was of direct benefit to producers, $28 billion (39%) went to private insurers, and $754 million (1%) went to the Risk Management Agency (RMA) within the U.S. Department of Agriculture (USDA).
Historically, the agricultural insurance market has been underdeveloped compared to other insurance markets. Agricultural insurance can be challenging to price for several reasons, including lack of crop data, difficulty in calculating actuarially based rates, production and price variations, geographically correlated risks, moral hazard, and adverse selection (i.e., the tendency of higher-risk farmers being more likely to purchase insurance than lower-risk farmers).
In 1938, on the heels of the Great Depression and the Dust Bowl, Congress created the federal crop insurance program as a potential alternative to supplemental disaster assistance payments. Initially polices were available for only a few principal crops in a limited number of counties. Few eligible acres were insured. The program underwent significant changes in 1980, when Congress authorized premium subsidies and brought private insurers into the program.
Since 1980, federal crop insurance has operated through a shared public-private arrangement funded by taxpayers and producers. Three principal actors operate the program:
1. Private insurance companies, known as Approved Insurance Providers (AIPs), which are the primary insurers selling and servicing the insurance policies; 2. The Federal Crop Insurance Corporation (FCIC), which reinsures the policies and subsidizes the delivery expenses of AIPs; and 3. RMA, which determines policy terms, sets premium rates, and regulates AIPs.
The terms of the financial arrangement between FCIC and AIPs are set out in a mutually negotiated Standard Reinsurance Agreement (SRA). Each AIP signs an SRA with FCIC annually.
In contrast to the program's limited scope and low participation rate in its early years, by 2011 federal crop insurance was providing more than $100 billion of insurance protection (liability) for over 100 crops (excluding hay, livestock, nursery, pasture, rangeland, and forage) on about 238 million acres. Policy offerings and participation were smaller for the livestock sector—$1.3 billion in liability on less than 3% of total eligible livestock inventory. In 2015, total premium for crops (excluding livestock and other policies) was about $9.8 billion, of which FCIC paid about 62% and producers paid about 38%. From 2000 to 2016, four crops—corn, soybeans, wheat, and cotton—accounted for 75% of enrolled acreage.
The program is permanently authorized and would continue to operate if Congress does not enact a new farm bill. However, past farm bills have made changes to the underlying authority. Given the program's significant cost and share of USDA program outlays, it is a frequent target for budgetary savings. Multiple bills introduced in the 115th Congress would modify the main financial components of the program. As with any large program, especially those with private sector involvement, congressional oversight has a significant role in ensuring that the federal crop insurance program meets its intended policy goals and operates efficiently.