Crop Insurance Today - 16

Table 4 Federal Crop Insurance Program Performance, Gross Basis1
CROP
YEAR

2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

POLICIES
UNITS WITH
WITH
PREMIUM
PREMIUM
Thousands

1,138
1,149
1,172
1,140
1,152
1,174
1,229
1,207
1,204
1,759

2,966
3,023
2,729
2,572
3,322
2,529
2,586
2,539
2,546
2,439

LIABILITY

PREMIUM

67,340
89,897
79,548
78,085
114,210
117,160
123,805
109,889
102,520
100,513

6,652
9,851
8,951
7,595
11,972
11,117
11,808
10,072
9,766
9,318

FARM-PAID
PREMIUM

INDEMNITY

GROSS
UNDERWRITING
GAIN

3,548
8,680
5,222
4,254
10,869
17,451
12,085
9,131
6,302
3,653

3,015
1,171
3,729
3,341
1,103
-6,334
-227
941
3,463
5,751

Million Dollars

2,739
4,160
3,524
2,883
4,509
4,138
4,511
3,858
3,678
3,457

INSURED
ACRES

LOSS
RATIO

Million

272
272
265
256
265
283
295
294
300
291

0.54
0.88
0.58
0.56
0.91
1.57
1.02
0.91
0.65
0.38

1
Data as of April 15, 2017
Source: RMA Summary of Business

lower than in other recent years. Gross underwriting gains are defined as the difference between premiums and indemnities. For 2016, the
gross underwriting gain recorded to date is $5.75
billion prior to significantly more than the $3.46
billion earned in 2015. Any gross underwriting
gains (or losses) of the program are shared between the Federal Crop Insurance Corporation
(FCIC) and the participating insurance companies as established under the provisions of the
Standard Reinsurance Agreement (SRA).
Having two consecutive years with solid
underwriting gains was a relief to the industry,
and partially compensated for the poor program performance in earlier years. Over the
2011-2016 life of the current SRA, company
underwriting gains have averaged 12.5 percent
of retained premium, below the level expected
when the SRA was negotiated. Furthermore,
company underwriting gains are only one component of their pre-tax income. After accounting for all revenues and costs, company pretax
net income is estimated to have averaged only
slightly more than four percent of retained premium over 2011-2016.
The public cost of the crop insurance program can be calculated using program outlays and revenues. These are equal to gross
indemnities, less farmer-paid premiums, plus
administrative and operating expense (A&O)
payments made on the farmer's behalf to the
companies, plus company underwriting gains.
While final costs for 2016 are still uncertain,
the total cost is estimated to be well below the
expected long-run level of $7.9 billion shown
in the January 2015 projections of the Congressional Budget Office (CBO) for the life of the
2014 Farm Bill.
The changes in insured acres of major crops
16

MAY2017

Table 5 Insured Acres by Major Crop1
CROPS

2014

2015

2016

CHANGE

% CHANGE

Wheat
Corn
Sorghum
Soybeans
Upland Cotton
Pasture, Range and Forage
Total above crops
Total all crops

47,953
79,015
5,302
73,856
10,366
52,763
269,254
294,456

49,428
78,641
6,961
74,802
8,590
54,651
273,072
299,922

43,416
82,201
5,418
73,275
9,429
51,782
265,521
290,888

-6,011
3,560
-1,543
-1,527
839
-2,869
-7,551
-9,035

-12.2
4.5
-22.2
-2.0
9.8
-5.3
-2.8
-3.0

1
Data as of April 15, 2017
Source: RMA Summary of Business

for 2016 are shown in Table 5. The decline in insured acres for wheat and the increase in insured
acres for corn and cotton are consistent with the

change in acres planted. Insured acres for soybeans fell in 2016, while planted acres increased
slightly. Total planted acres of principal crops

Figure 14 2016 MPCI Premium and Loss Ratios
All Plans Combined



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