Senators Encourage Insurance Process Improvements

Senate Ag Committee Chairman Tom Harkin, D-Iowa, has led a bipartisan group of ten Senators in calling upon USDA's Risk Management Agency to improve the process to be used in negotiating a new re-insurance contract between the federal government and private crop insurance companies. In the letter, the Senators wrote that the farm bill requires the corporation to consider alternative methods for determining reimbursement rates for administrative and operating costs. Also, the letter urges a fair and open negotiations process.

The letter to Administrator William Murphy precedes upcoming negotiations over the Standard Reinsurance Agreement, the standing contract which governs the financial relationship between USDA and the companies that deliver the Federal Crop Insurance Program to farmers. Any new approach must provide fair and adequate compensation to support program delivery so that farmers and ranchers continue to have access to insurance.

Many crop insurance company officials asserted that for the 2005 re-insurance year, SRA negotiations were not handled in a fair and open way, which led to a very contentious and lengthy process. For this reason, Congress worked to make changes to how the negotiations would unfold as provisions of the recent farm bill. This letter is intended to remind RMA as to how the Senate expects those provisions to be carried out.