The Department of Agriculture announced that the two agreements used by its Risk Management Agency to define the terms of reinsurance between the RMA and companies participating in the crop reinsurance program would remain in effect for the 2004 reinsurance year.
The Agricultural Risk Protection Act of 2000 permits the reinsurance agreements to be negotiated at the discretion of USDA once during the 2001 through 2005 reinsurance years. The renegotiated SRA and ACRA then would be in effect indefinitely or until new legislation comes into force.
In its New Year’s Eve announcement, the department said the decision to defer cancellation of the SRA until later was made after careful consideration of many factors.
“The current unsettled nature of the industry was a major concern,” it said in a press release. “This is reflected in lingering drought conditions in some parts of the country coupled with the demise of the largest company participating in the crop insurance program.
“Moreover, there is a growing recognition of the need to increase operational efficiencies within the companies and to reduce program costs.”
“The Agricultural Risk Protection Act of 2000 provided important risk management tools for farmers,” said Agriculture Secretary Ann M. Veneman. “Deferring the negotiations will give all parties more time to evaluate ways to improve program effectiveness and to reinforce the strong foundation required for even more effective risk management in the future.”
USDA is expected to announce next year that it will seek renegotiation of the SRA and the ACRA that would become effective with the 2005 reinsurance year.
“We believe this approach makes the most sense,” said Ross J. Davidson, administrator of the Risk Management Agency. “We reached this decision after consultation with participating insurance companies and are optimistic that the additional time will enable us to cooperatively achieve meaningful changes for the program, including substantial cost savings and enhanced regulatory oversight of the delivery systems.”