Order Code RL34207
Crop Insurance and Disaster Assistance:
2007 Farm Bill Issues
Updated April 9, 2008
Ralph M. Chite
Specialist in Agricultural Policy
Resources, Science, and Industry Division

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Crop Insurance and Disaster Assistance:
2007 Farm Bill Issues
Summary
The federal government has relied primarily on two policy tools in recent years
to help mitigate the financial losses experienced by crop farmers as a result of natural
disasters — a federal crop insurance program and congressionally mandated ad-hoc
crop disaster payments. Congress has made several modifications to the crop
insurance program since the 1980s, in an effort to forestall the demand for
supplemental disaster payments. Although the scope of the crop insurance program
has widened significantly over the past 25 years, the anticipated goal of crop
insurance replacing disaster payments has not been achieved.
The federal crop insurance program is permanently authorized and hence does
not require periodic reauthorization in an omnibus farm bill. However,
modifications to the crop insurance program are being discussed in the context of the
omnibus 2007 farm bill currently before Congress. Some policymakers have
expressed interest in expanding the crop insurance program and/or complementing
it with a permanent disaster payment program. Others view the crop insurance
program as a potential target for program cost reductions, and propose using these
savings to fund new initiatives in various titles of the farm bill.
Both the House- and Senate-passed versions of the 2007 farm bill (H.R. 2419)
contain several revisions to the crop insurance program, most of which are cost-
saving measures. Over the five-year period of the next farm bill (FY2008-FY2012),
crop insurance outlays would be reduced by $4.0 billion in the House bill and
approximately $3.7 billion in the Senate bill, as estimated by the Congressional
Budget Office (CBO). Both bills achieve most of their savings through a change in
the timing of crop insurance payment and receipts that will have no financial impact
on the program and its participants. The rest of the savings is generated through
other measures including proposed higher fees paid by farmers for catastrophic
coverage and smaller reimbursements to the participating insurance companies for
their operating expenses. In the House bill, the companies would be required to share
more of their potential underwriting gains with the government. A similar
requirement was offered as an amendment to the Senate farm bill but defeated on the
Senate floor. The Senate bill gives farmers participating in the commodity support
programs a choice between a new statewide “average crop revenue program” or
traditional farm program payments. An amendment adopted in committee deleted a
provision that would have required USDA to re-rate (reduce) crop insurance
premiums for ACR participants.
The Senate version of the 2007 farm bill also contains a provision that
authorizes a $5.1 billion trust fund to cover the cost of making agricultural disaster
payments available on an ongoing basis over the next five years. Conference on the
farm bill has been stalled primarily over funding issues, including how the cost of
new spending initiatives such as the proposed disaster payment program would be
offset.

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Contents
Crop Insurance Program Design and Operation . . . . . . . . . . . . . . . . . . . . . . 1
Current Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reducing Crop Insurance Program Costs . . . . . . . . . . . . . . . . . . . . . . . 4
Permanent Disaster Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Revenue Insurance Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Waste, Fraud, and Abuse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2007 Farm Bill Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
House-Passed 2007 Farm Bill (H.R. 2419) . . . . . . . . . . . . . . . . . . . . . . 6
Senate-Passed 2007 Farm Bill (H.R. 2419) . . . . . . . . . . . . . . . . . . . . . . 7
Administration Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
List of Figures
Figure 1. Crop Insurance and Disaster Payments:Total Federal Cost,
by Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
List of Tables
Table 1. Government Cost of Federal Crop Insurance . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Crop Insurance Provisions: House and Senate 2007 Farm Bill,
Administration Proposal, and Current Law . . . . . . . . . . . . . . . . . . . . . . . . . . 9

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Crop Insurance and Disaster Assistance:
2007 Farm Bill Issues
Agriculture is generally viewed as an inherently risky enterprise. Farm
production levels can vary significantly from year to year and by location, primarily
because farmers operate at the mercy of nature, and frequently are subjected to
weather-related and other natural disasters. Since the Great Depression,
policymakers have decided that the federal government should absorb some portion
of the weather-related production losses that otherwise would depress farm income
and could alter farmers’ decisions about what to produce in some high-risk locations.
Federal crop insurance is the primary ongoing crop loss assistance program. It
is permanently authorized by the Federal Crop Insurance Act, as amended (7 U.S.C.
1501 et seq.), and is administered by the U.S. Department of Agriculture’s Risk
Management Agency (RMA). This is complemented with the Non-Insured
Assistance Program, administered by the Farm Service Agency (FSA), which is
available to producers not offered insurance coverage. Lack of insurance availability
occurs in locations where there is insufficient production history to determine
actuarial risks of a crop or in regions where production of a specific commodity is
relatively small. Following a widespread and severe drought in 1988, Congress
approved a large ad hoc disaster assistance program to supplement the ongoing
disaster programs. Such ad hoc assistance subsequently has became routine.
For more information on currently available agricultural disaster assistance, see
CRS Report RS21212, Agricultural Disaster Assistance.
Crop Insurance Program Design and Operation
Federal crop insurance policies are marketed and serviced by private insurance
companies. In purchasing a policy, a producer growing an insurable crop may select
a level of crop yield and price coverage and pay a portion of the premium, which
increases as the levels of yield and price coverage rise. The remainder of the
premium is covered by the federal government. Coverage is made available through
various insurance products, including revenue insurance, which allows a participating
producer to insure a target level of farm revenue rather than just production levels.
According to the USDA, the federal crop insurance program provided coverage in
2007 to over 100 crops covering more than three-fourths of planted acreage in the
country. Although the list of covered commodities has grown in recent years, 80%
of total policy premiums (and federal subsidies) are accounted for by just four
commodities — corn, soybeans, wheat, and cotton.

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CRS-2
Table 1. Government Cost of Federal Crop Insurance
(millions of dollars)
Federal
Private Company
Fiscal
Program Losses
Other
Total
Premium
Admin. Expense
Year
or (Gains)a
Costsb
Gov’t. Cost
Subsidy
Reimbursements
1981
97
47
0
105
248
1982
(60)
91
18
110
160
1983
147
64
26
97
334
1984
211
98
76
102
487
1985
216
100
107
98
521
1986
216
90
101
97
504
1987
55
73
107
73
309
1988
609
103
155
78
945
1989
400
190
266
88
945
1990
234
213
272
87
806
1991
247
196
245
84
772
1992
232
197
246
88
764
1993
750
197
250
105
1,303
1994
(127)
247
292
78
489
1995
188
774
373
105
1,440
1996
88
978
490
64
1,621
1997
(373)
945
450
74
1,096
1998
(75)
940
427
82
1,374
1999
(74)
1,295
495
66
1,783
2000
196
1,353
540
86
2,175
2001
725
1,707
648
83
3,163
2002
1,182
1,513
656
114
3,466
2003
822
1,873
743
150
3,589
2004
(303)
2,387
899
142
3,125
2005
(591)
2,368
782
139
2,698
2006
(298)
2,782
960 126
3,571
Source: USDA Office of Budget and Program Analysis. Totals may not add due to rounding.
a. The difference between total premiums (farmer and government paid) and total indemnity payments
for crop losses, plus or minus any private company underwriting losses or gains.
b. Other costs primarily include federal salaries of USDA’s Risk Management Agency and beginning
in 2002, various research and development initiatives mandated by ARPA of 2000 (P.L. 106-
224).

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Because the program is not subject to periodic reauthorization, major changes
to the crop insurance program usually are not addressed in the context of an omnibus
farm bill. Over the past 25 years, the program has been subject to three major
legislative enhancements (in 1980, 1994, and 2000),1 each of which has pumped
additional federal dollars into the program in order to enhance farmer participation
levels in anticipation of precluding the demand for ad hoc disaster payments.
Since the last major modification in 2000, the federal subsidy to the crop
insurance program has averaged about $3.25 billion per year, up from an annual
average of $1.1 billion in the 1990s and about $500 million in the 1980s. Nearly
two-thirds of the current federal spending is used to subsidize insurance policy
premiums, and the balance primarily covers the government share of program losses
and reimburses participating private insurance companies for their administrative and
operating expenses (see Table 1).
Although the scope of the program has widened significantly over the past 25
years, the anticipated goal of crop insurance replacing disaster payments has not been
achieved. In virtually every crop year since 1988, Congress has provided ad hoc
disaster payments to farmers with significant weather-related crop losses. These have
been made available primarily through emergency supplemental appropriations, and,
until recently, regardless of whether a producer had an active crop insurance policy.
The exception to the historical pattern is the FY2007 supplemental appropriations act
(P.L. 110-28, as amended by the FY2008 Consolidated Appropriations Act), which
is expected to provide an estimated $2.4 billion in crop disaster payments for 2005,
2006, or 2007 crop losses, but only to those producers who held an active crop
insurance policy or enrolled in the noninsured assistance program in the year of the
crop loss.2
Since FY1989, total disaster payments have amounted to more than $20 billion,
or just over $1 billion per year. Over the past six years (FY2001-FY2006), the federal
cost of the crop insurance program combined with ad hoc supplemental disaster
payments has averaged $4.5 billion per year (see Figure 1).
For a summary of all agricultural disaster assistance provided by Congress since
1988, see CRS Report RL31095, Emergency Funding for Agriculture: A Brief
History of Supplemental Appropriations, FY1989-FY2007.
1 Federal Crop Insurance Act of 1980 (P.L. 96-365), Federal Crop Insurance Reform Act
of 1994 (P.L. 103-354), Agriculture Risk Protection Act (ARPA) of 2000 (P.L. 106-224).
For information on ARPA of 2000, see CRS Report RL30739, Federal Crop Insurance and
the Agriculture Risk Protection Act of 2000 (P.L. 106-224).
2 This assistance was provided in Title IX, Section 9001 of the FY2007 Iraq War
Supplemental Act (P.L. 110-28). The projected spending of $1.5 billion for 2005, 2006 and
early 2007 crop losses will be made in FY2008. For a description of this and other types of
agricultural assistance made available in P.L. 110-28, see CRS Report RS21212,
Agricultural Disaster Assistance.

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Figure 1. Crop Insurance and Disaster Payments:
Total Federal Cost, by Fiscal Year
6000
5000
4000
$
n
o 3000
illi
M
2000
1000
0
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Crop Insurance
Crop Disaster Payments
Source: Primary data are from USDA’s Table 35, CCC Net Outlays by Commodity & Function for
disaster payments, and USDA’s Office of Budget & Program Analysis for crop insurance.
Current Issues
Reducing Crop Insurance Program Costs. Although crop insurance is
sold and serviced by private insurance companies, the federal government absorbs
a large portion of program losses and reimburses the companies for their
administrative and operating (A&O) expenses. Loss sharing and A&O
reimbursements currently are spelled out in a Standard Reinsurance Agreement
(SRA) between USDA and the private companies.3 The Administration and others
contend that the private insurance companies should be required to absorb more of
the program losses, and that the reimbursement rate for company A&O expenses
needs to be reduced as a means of reducing federal costs. Under the SRA, the
reimbursement rate for A&O expenses currently averages about 22% to 24% of total
premiums. Proponents for change point out that A&O reimbursements to the
companies have doubled over the last seven years (see Table 1), mainly because
farmers have been buying up to higher levels of insurance coverage, causing total
premiums to rise. Since A&O reimbursements are based on a percentage of total
premiums (and premiums have been rising significantly in tandem with crop prices),
the Administration contends that the companies are being overcompensated for their
expenses. The private crop insurance companies contend that any reductions in their
3 For more background and for the text of the SRA, see [http://www.rma.usda.gov/pubs/ra/].

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A&O reimbursement would negatively impact the financial health of the crop
insurance industry and possibly jeopardize the delivery of crop insurance, particularly
in high-risk areas.
Permanent Disaster Payments. Some policymakers want to make
permanent in the farm bill some level of disaster payments to supplement the crop
insurance program. Supporters say that ongoing farm disaster programs do not
adequately address emergency needs when a major disaster strikes and that USDA
should have at its disposal a permanent source of disaster funds in the same manner
as the Federal Emergency Management Administration (FEMA). Questions in the
debate include how such a program would be funded given current budget
constraints, and whether the permanent availability of disaster payments would
adversely affect participation in the crop insurance program, and possibly encourage
production on high-risk lands.
Revenue Insurance Expansion. Historically, farm risks associated with
low commodity prices have been shared with the federal government through the
commodity price and income support programs. Separately, production risks
associated with weather have been shared with the federal government through
subsidized crop insurance (and supplemented by disaster payments). A proposed
concept that has gained momentum recently is to combine these programs into a
single revenue insurance program. The concept is not new and received some
consideration by Congress during the 1985 farm bill debate.4
The National Corn Growers Association has proposed a version of revenue
insurance that potentially would combine or replace the commodity support programs
and crop insurance programs for the so-called covered commodities (corn and other
feed grains, soybeans and other oilseeds, wheat, rice, and cotton).5 One justification
for a shift from commodity support programs to a revenue insurance system is to
reduce the production and trade distorting impacts of the federal commodity
subsidies. However, even for revenue insurance programs there are limits under
World Trade Organization (WTO) rules for what would qualify as “green box” or
non-trade distorting support. Under current WTO rules, a federally subsidized
revenue insurance program can provide benefits for a level of coverage only below
70% of revenue to qualify as non-trade distorting.
Waste, Fraud, and Abuse. For many years, policymakers have been
concerned about waste, fraud, and abuse within the federal crop insurance program.
The Agricultural Risk Protection Act (ARPA) of 2000 (P.L. 106-224) contained
several provisions that were designed to enhance USDA’s recognition of and
response to challenges to program compliance and integrity. In response to the
ARPA requirements, USDA used “data mining” techniques to compile an annual list
4 Revenue insurance options are examined by Robert Dismukes and Keith H. Coble,
“Managing Risk With Revenue Insurance,” Amber Waves, November 2006, at
[http://ers.usda.gov/AmberWaves/November06/Features/Managing.htm].
5 The proposal is explained in the National Corn Grower Association report titled Forging
a New Direction for Farm Policy, October 19, 2006, at [http://www.ncga.com/news/notd/
pdfs/10_23_06NFSA.pdf].

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of producers who either exhibit high loss ratios (i.e., high indemnity payments
relative to total premiums), high frequency and severity of losses, or who are
suspected of poor farming practices that might contribute to production losses.
USDA estimates that the use of the spot-check list has prevented between $70
million and $110 million each year in improper payments. Mandatory funding
authorized by ARPA for data mining and other ARPA-related program integrity
activities expired at the end of FY2005. The FY2006 agriculture appropriations act
(P.L. 109-97) and the FY2007 continuing appropriations resolution (P.L. 110-5)
each allowed $3.6 million in discretionary funds for data mining and warehousing
activities, within the regular annual appropriation for the Risk Management Agency.
More recently, a general provision in the FY2008 Consolidated Appropriations Act
(P.L. 110-161) allows USDA to use up to $11.166 billion in mandatory funds to
strengthen its ability to reduce waste, fraud, and abuse within the crop insurance
program. However, future funding for this activity remains uncertain. Some would
like to see permanent funding for program integrity activities addressed in the farm
bill.

2007 Farm Bill Action
Some policymakers have expressed interest in expanding the crop insurance
program in the context of the 2007 farm bill and/or complementing it with a
permanent disaster payment program. However, many view the crop insurance
program as a potential target for program cost reductions, and propose using these
savings to fund new initiatives in various titles of the farm bill.
House-Passed 2007 Farm Bill (H.R. 2419). As passed by the House, H.R.
2419 contains several revisions to the crop insurance program. Virtually all of these
changes are cost-saving measures, which CBO has estimated at $4.04 billion in
reduced federal outlays over five years (FY2008-FY2012).
Approximately $2.8 billion of this estimated savings is attributable to changes
in the timing of premium receipts from farmers, and payments to the companies.
Neither would directly affect the final monetary amounts for participating farmers or
insurers, but would still be scored as savings within the five-year horizon of the bill.
However, approximately $1 billion of the five-year savings is realized by requiring
insurance companies and farmers to share more in program costs. Farmers would be
required to pay higher fees for catastrophic coverage and some plans would provide
somewhat lower premium subsidies. Participating insurers would see smaller
reimbursements for their operating expenses and would be required to share more of
their underwriting gains with the government. The House-passed bill also authorizes
$11 million in mandatory funding in FY2008 and $7 million in FY2009 and
subsequent years for data mining activities of USDA’s Risk Management Agency,
in an effort to reduce waste, fraud, and abuse within the program. Based on past
experience of agency activities to monitor program abuses, CBO estimates that this
funding will generate $125 million in program savings, more than offsetting the cost
of the initiative.
The House-passed bill does not include a provision for a permanent disaster
payment program. The House Agriculture Committee reported version of the bill
would have authorized USDA to implement a permanent disaster payment program,

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but only if a budgetary offset was made for the additional cost. CBO projected that
this permanent program for crops, livestock, and trees, as proposed by Chairman
Peterson, would have cost approximately $950 million per year. The House-passed
bill also does not contain a committee provision that would have allowed insured
farmers to opt for additional coverage on the deductible portion of their policies,
which was similar in concept to the Administration-proposed supplemental
deductible coverage plan (see “Administration Proposal” below).
Senate-Passed 2007 Farm Bill (H.R. 2419). On December 14, 2007, the
Senate completed action on its version of the 2007 farm bill, which contains crop
insurance program savings of approximately $3.75 billion over five years, as
estimated by CBO. Like the House bill, the Senate bill generates much of its savings
($2.9 billion) by changing the timing of payments to the insurance companies and
premium receipts from farmers. Also as in the House measure, the Senate bill
includes an increase in the administrative fees paid by farmers for catastrophic crop
insurance coverage and the Noninsured Assistance Program (NAP) from the current
$100 per crop per county to $200 per crop (for savings of $228 million over five
years). The Senate bill also includes an across-the-board 2 percentage point
reduction in the reimbursement rate to the participating private insurance companies
for their administrative and operating expenses, compared with a 2.9 percentage point
reduction in the House bill.
Separately, the commodity support provisions in the Senate bill offer farmers
a choice between traditional farm commodity program payments and an average crop
revenue (ACR) payment. The ACR plan is based on whether actual state-level
revenue drops below an expected revenue target, on a crop by crop basis. The
program would begin with the 2010 crop year and participation would apply to all of
the covered crops on a farm for the remainder of the farm bill. An amendment
adopted in committee struck a provision in the bill that would have required USDA
to re-rate (reduce) insurance premiums for ACR participants. (If they were re-rated,
crop insurance premiums would likely fall for ACR participants, since statewide
production risks are being shifted from the crop insurance program to the ACR
program.) ACR supporters consider a re-rating of premiums to be an integral feature
of the proposed ACR program. Supporters of the amendment were concerned that
a reduction in insurance premiums in lower risk areas might lead to an increase in
premiums for the higher risk areas.
See Table 2 below for a comparison of selected crop insurance provisions in the
House- and Senate-passed versions of the farm bill (H.R. 2419) compared with
current law and the Administration’s legislative proposal.
Permanent Disaster Payment Program. The Senate-passed version of the
2007 farm bill also authorizes a permanent trust fund to make agricultural disaster
payments available on an ongoing basis over the life of the next farm bill. The
proposed new program would supplement the current crop insurance program, and
would require a farmer to carry at least the catastrophic level of coverage as a
prerequisite for a payment. According to CBO, the program would cost $5.1 billion
over five years (FY2008-FY2012). CBO estimates that $2.9 billion of that amount
would go directly to crop and livestock producers in the form of direct disaster
payments and the other $2.2 billion would cover increased crop insurance costs

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associated with the crop insurance purchase requirement. Most of the cost would be
funded through a mandated transfer of 3.34% of annual customs receipts from the
U.S. Treasury to the new trust fund.
Under the proposed program, an eligible farmer in a disaster-declared county
would receive 52% of the difference between an established guaranteed level of
revenue and actual total farm revenue. The target level of revenue would be based on
the level of crop insurance coverage selected by the farmer, thus increasing if a
farmer opts for higher levels of coverage. The proposal also allows the trust fund to
be tapped for indemnity payments to livestock producers and orchardists to
compensate for significant mortality losses caused by a natural disaster. Up to $35
million annually from the fund also could be used for livestock, honey bee, and farm-
raised fish losses caused by adverse weather or other environmental conditions.
Administration Proposal. The Administration’s farm bill proposal contains
several crop insurance recommendations that it claims will enhance participation;
address issues of waste, fraud and abuse; reduce costs; and reduce the need for
emergency supplemental disaster payments.6
One Administration-proposed change to the program would allow participating
farmers to purchase insurance for the portion of their production that is part of their
deductible, and not currently covered by crop insurance. The Administration is
opposed to a permanent disaster payment program, and contends that its proposed
deductible or “gap” coverage would help preclude the need for supplemental disaster
payments. Under this proposed supplemental deductible coverage plan, a producer
could purchase an additional policy, and a payment would be made when losses in
the producer’s county exceed a certain threshold.
The Administration also recommends several cost-saving measures to the
program, including reducing premium subsidies by 2 to 5 percentage points, and
charging premiums for the catastrophic level of coverage (which currently is
premium-free). The Administration proposal would require the private insurance
companies to absorb more of the cost of the program through a proposed 2
percentage point reduction in the A&O expense reimbursement and by requiring the
companies to absorb more of the program losses. The Administration also proposes
a requirement that farmers purchase crop insurance as a prerequisite for participating
in the farm commodity support programs.7 The Congressional Budget Office
estimates that all of the Administration’s cost-saving proposals would reduce federal
outlays by $882 million over five years (FY2008-FY2012), while the proposed
supplemental deductible coverage would increase spending by $148 million over the
same period.

6 For the legislative text of the portion of the Administration’s farm bill proposal dealing
with crop insurance, see [http://www.usda.gov/documents/FBmisc_2007.pdf].
7 Such a requirement was instituted in 1994 crop insurance legislation (P.L. 103-354), but
was subsequently rescinded in the 1996 farm bill (P.L. 104-127).

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Table 2. Crop Insurance Provisions: House and Senate 2007 Farm Bill, Administration Proposal, and Current Law
SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
“Farm Security and Rural Investment Act
Released Spring 2007
“Farm, Nutrition, and Bioenergy Act of
“Food and Energy Security Act of 2007”
of 2002” [7 U.S.C. 7901 note]
[http://www.usda.gov/farmbill/]
2007”
CROP INSURANCE AND DISASTER ASSISTANCE — TITLE X -MISCELLANEOUS (ADMIN. PROPOSAL), TITLE XI - MISCELLANEOUS (HOUSE), TITLE I (SENATE)
Timing of Crop Insurance Payments and Receipts
The federal government provides three
No comparable provision.
Changes the timing of crop insurance
Similar, but not identical, language as the
levels of subsidies to the crop insurance
receipts (premium collections) and the
House bill, which effectively requires
program by: (1) subsidizing a portion of
timing of payments to the insurance
premiums to be collected from producers
the farmer-paid premium, (2)
companies. Two insurance years of
slightly earlier, and payments to the
reimbursing the private crop insurance
program receipts will be received in the
insurance companies to be made slightly
companies for most administrative and
same fiscal year (FY2012) and payments
later, beginning in the 2012 crop year.
operating expenses, and (3) absorbing
will be delayed until the next fiscal year.
[Secs. 1906 and 1914]
most of the program losses.
[Secs. 11001(c), 11001(e), and 11010]
CBO 5-yr. savings score = $2.89 billion.
[7 USC 1501 et seq.]
CBO 5-yr. savings score = $2.79 billion.
Reimbursement of Administrative and Operating Expenses
Current law prohibits companies from
Beginning in the 2008 reinsurance year,
Beginning in the 2009 reinsurance year,
Beginning in the 2009 reinsurance year,
receiving a reimbursement greater than
the reimbursement rate drops from the
the reimbursement rate to the insurance
the reimbursement rate for additional
24.5% of total premiums. The current
current maximum of 24.5% to 22.5%.
companies for their administrative and
coverage policies falls by 2 percentage
Standard Reinsurance Agreement (SRA)
[Sec. 10102(f)]
operating expenses for all policies
points. An exception is any reinsurance
establishes the reimbursement rate below

declines by 2.9 percentage points from
year in any state that has a loss ratio
the statutory maximum for all insurance
the current rate. The range of
greater than 1.2 (i.e., when indemnity
plans, ranging from 18.1% to 24.2%.
reimbursement rates declines to between
payments exceed total premiums by more
[7 USC 1508(k)(4)(A)]
15.2% to a maximum of 21.3%.
than 20%.) The reimbursement rate for
[Sec. 11001(d)(1)]
policies based on area-wide losses is
CBO 5-yr. savings score = $625 million.
reduced to 17% of premiums. [Sec. 1912]
CBO 5-yr savings score = $419 million.
Premiums and Fees
For catastrophic (CAT) coverage,
Requires producers to pay a fee per crop
Increases the producer-paid fee for
Similar to the House bill for raising the
producers pay no premium, but pay an
per county for CAT coverage equal to
catastrophic coverage to $200 per crop
CAT fee to $200. The NAP fee is
administrative fee of $100 per crop per
25% of the premium for such coverage,
per county. For NAP, the fee also is
increased to $200 per crop per county, or
county. [7 USC 1508(b)(5)(A)] Growers
or $100, whichever is greater. Maximum
raised to $200 per crop per county, or
$600 per producer per county, not to
of uninsurable crops are eligible for a
fee per producer is $5,000 for all crops in
$600 per producer per county, not to
exceed $1,500 per producer.
Noninsured Assistance Program (NAP)
all counties. The imputed premium for
exceed $1800 per producer.
[Secs. 1905 and 1926]
and pay a fee of $100 per crop, or $300
CAT coverage can be reduced by USDA
[Secs. 11002 and 11009]

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SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
per producer per county, not to exceed
in any areas where losses have been
CBO 5-yr. savings score = $228 million
CBO 5-yr. savings score = $228 million
$900 per producer. [7 USC 7333(k)(1)]
historically low. [Sec.10102(a), Sec.
10102(d)]
When permitted by state law, a
No comparable provision.
Limits the ability of associations to pay
Revises current law to clarify that the
cooperative or trade association may pay
the CAT fee on behalf of a producer.
provision applies only to fees for CAT
on behalf of its members, any or all of
[Sec. 11001(b)] Prohibits insurance
coverage. [Sec. 1905]
the administrative fee for CAT coverage.
companies from paying or rebating
[7 USC 1508(b)(5)(B)] .
premiums, or making any inducements to
purchase crop insurance.
[Sec. 11001(a)]
Authorizes crop insurance companies to
No comparable provision.
Strikes authority for companies to offer a
Similar to the House bill and requires
offer customers a discount when the
Premium Reduction Plan (PRP).
USDA to commission a study on the
insurance companies adopt efficiencies
[Sec. 11001(f)]
feasibility of the PRP within 18 months
that reduce their administrative and
of enactment. [Sec. 1908]
operating costs. [7USC 1508(b)(5)(A)]
No comparable provision.
No comparable provision.
Reduces the premium subsidy for area
No comparable provision.
risk plans by 4 percentage points.
[Sec. 11013]
CBO 5-yr. savings score = $73 million.
Requires USDA to set premiums so that
Same as the Senate bill, and also requires
No comparable provision.
Reduces the statutory loss ratio to 1.0,
the overall program loss ratio is 1.075.
USDA to report the projected loss ratio
meaning that total premiums should be
[7 USC 1506(o)]
for the coming reinsurance year by
established to equal expected total
March 1. [Sec. 10101]
indemnity payments. [Sec. 1903]
CBO 5-yr. savings score = $65 million.
Authorizes an Agricultural Management
No comparable provision.
No comparable provision.
Allows USDA to use AMA funds to
Assistance (AMA) program to in part
match state funds used to provide
help certain states make better use of risk
additional premium discounts to
management tools. [7 USC 1524(b)]
underserved states. [Sec. 1923]
USDA is required to provide a premium
Reduces the premium subsidy by either 2
No comparable provision.
No comparable provision.
subsidy to participating producers
or 5 percentage points, so that the range
ranging from 38% to 67% of the total
of subsidy is from 36% to 62%.
premium depending on the level of
[Sec. 10102(c)]
coverage. [7 USC 1508(e)(2)]

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CRS-11
SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
Standard Reinsurance Agreement and Risk-Sharing
The current Standard Reinsurance
Same as the House bill.
Requires the private insurance companies
No comparable provision.
Agreement (SRA) between the federal
[Sec. 10102(e)]
to reinsure at least 22% of their retained
government and private crop insurance
premiums with the government, and in
companies determines levels of risk
return the government will provide a
sharing. The current agreement requires
ceding commission of 2% to companies,
companies to reinsure 5% of their
allowing the government to receive some
retained premium with the government.
underwriting gains that would otherwise
accrue to the companies. [Sec. 11014]
CBO 5-yr. savings score = $123 million
No comparable provision.
USDA can renegotiate the SRA no more
USDA can renegotiate the SRA starting
Similar to the House bill, except that
frequently than once every 3 years.
with the 2012-13 reinsurance year, and
USDA has discretion to renegotiate the
[Sec. 10103(a)]
once every 5 years thereafter. Insurance
SRA more frequently than every 5 years,
companies can confer with each other
with congressional notification of such
during the process. [Sec. 11001(d)(2)]
action. [Sec. 1913]
Program Integrity (Waste, Fraud, and Abuse)
Annual mandatory funds of $23 million
Requires USDA to establish a program
Authorizes mandatory funding of $11
Requires USDA to establish a program
for data mining and program integrity
under which participating private crop
million in FY2008, and $7 million in
whereby crop insurance companies pay
activities expired at the end of FY2005.
insurance companies pay USDA a user
FY2009 and subsequent years for crop
USDA a fee for access to its data mining
[7 USC 1516(k)] Annual appropriations
fee in exchange for access to its data
insurance program compliance and
system, and USDA uses proceeds for its
acts provided $3.6 million in annual
mining system used to detect fraud and
integrity activities, including data
data system (no net cost). [Sec. 1915]
discretionary funds (FY2006, FY2007).
abuse. Funds collected will be used to
mining. [Sec. 11008] CBO estimates that
Prohibits farmers from collecting
FY2008 appropriations act authorized
maintain and improve the data mining
enhanced data mining activities will save
commissions as agents on policies in
mandatory funds of $11.2 million.
system. [Sec. 10104]
$125 million over 5 years, more than
which their family has a substantial
offsetting the $38 million in new, 5-year
interest. [Sec. 1904]
funding (for net savings of $87 million).
Risk Management Research and Development
USDA is required to reimburse an
Provides USDA with the contracting
Authorizes USDA to use no more than
Reduces mandatory funding for R&D
applicant for the R&D costs associated
authority to use existing funds to review,
$30 million annually in mandatory funds
from $15 million to $7.5 million, and for
with developing a new plan of crop
evaluate, and improve its existing
for grants for R&D and education and
contracting and partnerships from $25
insurance that is approved by USDA [7
programs to keep pace with technology,
information programs, of which $5
million to $12.5 million. Prohibits a
USC 1522] and with developing crop
changing farming practices, alternative
million is for underserved states.
surcharge on premiums for organic crops,
insurance education programs. [7 USC
crop uses, genetically modified crops,
Stipulates criteria for which grants will
unless greater loss history is confirmed.
1524] Current annual mandatory funding
value-added commodities, and food
be awarded. Requires USDA to enter into
Establishes an alternative reimbursement
is $15 million for R&D reimbursements
grade quality crop production. [Sec.
contracts to improve coverage for
grant process. Requires USDA to enter
and $25 million for contracting and
10105] Any unused R&D funding (up to
organic crops, and to address the needs of
into contracts to expand coverage for

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CRS-12
SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
partnerships. [7 USC 1522(e)]
$10 million per year) can be used to
beginning and minority farmers.
organic crops, aquaculture, energy crops
improve program integrity.
[Secs. 11003-11006]
such as switchgrass, and to address the
[Sec 10106]
CBO 5-yr. savings score = $87 million.
needs of beginning and minority farmers.
[Secs. 1917-1919, 1907]
CBO 5-yr. savings score = $87 million.
Other Crop Insurance Provisions
No comparable provision.
No comparable provision.
Native grassland and pasture never
Makes lands over 5 acres converted from
used for crop production are ineligible
native sods ineligible for crop insurance
for crop insurance for the first 4 years of
and noninsured assistance. Directs
planting. [Sec. 11007]
USDA to report on conversion of non-
CBO 5-yr. savings score = $33 million.
cropland since 1985. [Sec. 2608]
CBO 5-yr. savings score = $23 million.
No comparable provision.
No comparable provision.
Establishes a National Drought Council
No comparable provision.
within USDA and national drought
preparedness plans, including a Drought
Assistance Fund to provide technical and
financial assistance to states for
mitigating drought risk.
[Sec. 11012]
Ad-hoc emergency disaster payments are
No comparable provision.
Prohibits USDA from using production
Similar to the House bill. Also requires
available to producers who experienced
data from the sweet potato crop
USDA to extend the disaster application
significant losses to a 2005, 2006, or
insurance pilot program in determining
deadline for sweet potato growers, if
2007 crop. (Sec. 9001 of P.L. 110-28, as
crop disaster payments for 2005 and
necessary, to implement this provision.
amended by P.L. 110-161).
2006. [Sec. 11016]
[Sec. 1927]
Authorizes USDA to create crop
No comparable provision.
Mandates a sesame insurance pilot
Creates pilot programs for sesame [Sec.
insurance pilot programs.
program for Texas. [Sec. 11011]
1921], camelina [Sec. 1920], and
[7 USC 1523]
enterprise/whole farm units [Sec. 1909].
CBO 5-yr. savings score = $22 million
(for enterprise and whole farm units)
No comparable provision.
No comparable provision.
No comparable provision.
Makes contract livestock producers
eligible for crop insurance, if not covered
by other policies. [Sec. 1916] Requires a
USDA report on issues regarding
declining crop insurance yields,
especially for perennials. [Sec. 1928]

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CRS-13
SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
Eligible producers who seek a USDA
Program Linkage: Requires producers
No comparable provision.
No comparable provision.
direct or guaranteed farm loan must
to purchase the minimum level (50/100,
purchase at least CAT coverage, when
i.e., 50% of production at 100% of
available, as a prerequisite for a loan. [7
market price) of buy-up insurance
USC 2008f]
coverage as a prerequisite for
participation in the farm commodity
support programs, Conservation Reserve
Program, and USDA farm loans.
[Sec. 10102(b)]
Disaster Assistance
Congress periodically provides ad-hoc
Authorizes USDA to offer a subsidized
No comparable provision.
Creates permanent authority for a disaster
emergency disaster payments to crop and
“supplemental deductible coverage”
payment program that provides payments
livestock growers to supplement income
option that would cover the portion of
to crop and livestock growers who
following a natural disaster. Most
crop losses not covered under the crop
experience significant production losses
recently, Congress provided emergency
insurance program, based on area-wide
in a USDA-declared disaster area. For
supplemental assistance for 2005, 2006,
losses rather than individual losses. [Sec.
FY2008-12, the program is funded
or 2007 production losses. [Sec. 9001 of
10107]
through a transfer of 3.34% of annual
P.L. 110-28, as amended by P.L.
customs receipts from the U.S. Treasury.
110-161].
Payments are made under new permanent
programs: crop disaster; livestock
indemnity; tree assistance and emergency
livestock assistance. [Sec. 12101]
CBO 5-yr. savings score = $5.06 billion
The 2002 farm bill established the Tree
No comparable provision.
Makes nursery tree growers eligible for
Makes nursery tree growers eligible for
Assistance Program to compensate
disaster assistance under the program,
disaster assistance, increases the
commercial orchardists for losses due to
increases the limitation on annual
limitation on annual assistance to
natural disasters and authorized annual
assistance from $75,000 to $150,000, and
$100,000, adds reimbursement for
appropriations for the program. [7 U.S.C.
continues appropriations authority. [Sec.
orchard management to repair losses, and
8201]
10101]
provides necessary mandatory funding
over the life of the farm bill. [Sec.
1210(e)]
The Small Business Administration
No comparable provision.
No comparable provision.
Makes many changes to SBA disaster
offers low interest, fixed-rate loans to
loan program authority including raising
small businesses to help them recover
the loan cap from $1.5 million to $2
from economic injury caused by a natural
million; extending assistance to non-
disaster.
profits; enhancing SBA and FEMA
[15 USC 636(b), (c), and (f)]
coordination of disaster response, among
Note: Farmers generally are not eligible
other provisions. [Secs. 11111-11161]

---

CRS-14
SENATE-PASSED SUBSTITUTE
ADMINISTRATION’S LEGISLATIVE
HOUSE-PASSED BILL
CURRENT LAW/POLICY
AMENDMENT
PROPOSAL -SPRING 2007
(H.R. 2419)
(H.R. 2419)
for SBA loans, and instead receive
assistance through USDA programs.
Sec. 9012 of the U.S. Troop Readiness,
No comparable provision.
Amends Sec. 9012 by stating that “the
No comparable provision.
Veterans’ Care, Katrina Recovery, and
purchase of a Non-insured Assistance
Iraq Accountability Appropriations Act
Program (NAP) policy shall not be a
of 2007 (P.L. 110-28) required that “in
requirement to receive any Federal
carrying out crop disaster and livestock
livestock disaster assistance.” [Sec.
assistance in this title, the Secretary shall
11015]
require forage producers to have
participated in a crop insurance pilot
Note: The House farm bill was passed
program or the Non-Insured Crop
prior to enactment of P.L. 110-80, which
Disaster Assistance Program (NAP)
removed the crop insurance or NAP
during the crop year for which
purchase requirement for forage
compensation is received.”
producers.
In August 2007, separate legislation was
enacted (P.L. 110-80), removing this
requirement for forage producers.

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