A new study has found private crop insurance company returns have declined significantly since the 2010 renegotiation of the Standard Reinsurance Agreement between the insurance companies and the federal government. The findings in the study, commissioned by the National Corn Growers Association, are in line with benchmarks established by the U.S. Department of Agriculture’s Risk Management Agency. According to the findings, from 1998 to 2010, crop insurance companies had an average net return on retained premium of 14.1 percent. From 2011 to 2015, returns averaged 1.5 percent, a decrease of 12.6 percentage points.
The Standard Reinsurance Agreement establishes the levels of compensation for the companies. The 2010 renegotiations substantially cut reimbursements and limited the share of underwriting gains that crop insurance companies could receive. As a result, net returns to retained premiums are expected to average approximately 5.7 percentage points lower compared to pre-2010 levels.
Source: NAFB News Service