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September 13, 2021
Federal Crop Insurance Program Support for Natural Disasters
Natural disasters—events such as severe droughts, floods,
farm yields or between 0% and 65% of average county
and storms—can cause crop and animal production losses
yields. Higher levels of yield coverage and revenue
as well as other physical and financial losses for farm
coverage are available in 5% increments. For some policies,
operations. The Federal Crop Insurance Program (FCIP)
coverage may exceed 85%. To mitigate against farmers’
offers farmers the opportunity to purchase insurance against
tendency to take on extra risk after purchasing insurance
financial losses caused by certain adverse growing and
(i.e., moral hazard), no policies provide 100% loss
market conditions. By insuring against adverse growing
coverage.
conditions, FCIP policies may also indemnify farmers for
financial losses caused by certain natural disaster events.
Additionally, certain annual crops may be eligible for FCIP
The extent to which the FCIP indemnifies farmers for
indemnities if adverse weather and other naturally
losses related to natural disasters depends on the type of
occurring conditions prevent timely planting. For details
disaster, the type of FCIP policy purchased, and the level of
about these payments, see CRS Report R46874, Federal
coverage selected by the producer.
Crop Insurance Program (FCIP): Replanting, Delayed
Planting, and Prevented Planting.
The FCIP is permanently authorized under the Agricultural
Adjustment Act of 1938 (P.L. 75-430, 52 Stat. 72) and the
The federal government fully subsidizes premiums for CAT
Federal Crop Insurance Act of 1980 (P.L. 96-365, 7 U.S.C.
coverage. Farmers pay an increasing share of the premiums
§§1501 et seq.), as amended. It has permanent, indefinite
for higher levels of coverage, up to a maximum of 62% of
funding authority. The FCIP does not require a federal
the total premium. In addition to their share of premium
disaster designation or declaration to trigger payments.
costs, farmers pay administrative fees per crop per county.
FCIP insurance policies are priced according to their
Federal outlays for the FCIP averaged $8.2 billion per year
actuarial ratings. The federal government subsidizes the
from FY2011 to FY2020.
premiums that farmers pay for these insurance policies to
encourage farmer participation in the program. For more
Coverage Purchased
information, see CRS Report R46686, Federal Crop
From 2011 to 2020, the total acreage insured through the
Insurance: A Primer.
FCIP increased from 266 million to 398 million acres
(Figure 1). The share of acres insured at higher coverage
In addition to the FCIP, the U.S. Department of Agriculture
levels also increased over this period. Both of these trends
(USDA) offers a number of assistance programs designed
have increased the aggregate support that the FCIP can
to address agricultural losses following a natural disaster.
provide for natural disasters when they occur.
For an overview of these programs, see CRS In Focus
IF10565, Federal Disaster Assistance for Agriculture.
Figure 1. FCIP Acres Insured by Coverage Level
Insured Perils
FCIP crop insurance policies insure against losses due to
drought; heat; hail; excess moisture, precipitation, or rain;
frost; freeze; cold, wet weather; wind; tornado; cyclone;
hurricane or tropical depression; certain fires; earthquake;
insect and wildlife damage; plant disease; volcanic
eruption; and certain other causes of loss. The policies also
cover lack of irrigation water when caused by disasters or
natural conditions. Certain policies insure against losses
caused by declines in market prices .
Coverage Availability
FCIP coverage is available for purchase in all U.S. counties.
Source: CRS using data from USDA Risk Management Agency
The FCIP insures most field crops, a wide variety of
Summary of Business database, downloaded August 18, 2021.
specialty crops, and grazing lands. Coverage must be
Notes: Years are crop years. Includes crops insured under acreage
purchased before a natural disaster event.
policies only. Catastrophic includes yield coverage only. Other
coverage levels include yield and revenue coverage.
For most crops insured under the FCIP, coverage is
measured in relation to average yields or revenues.
States with higher crop values insured under the FCIP are
Catastrophic (CAT) coverage provides indemnities when
likely to receive more support from the program when
realized crop yields are between 0% and 50% of average
natural disasters occur. States in the Midwest, as well as
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Federal Crop Insurance Program Support for Natural Disasters
California, Texas, Florida, and Washington had the largest
Decline” includes losses due to declines in market prices. “County
crop values insured by the FCIP in 2020 (Figure 2).
and Margin Policies” include losses due to declines in average county
yields and revenues. “Al Others” includes losses due to hail, fire,
Figure 2. Crop Values Insured by the FCIP in 2020
insect damage, disease, and other insurable perils.
Figure 4. FCIP Indemnities Paid by Loss Type
Source: CRS using data from USDA Risk Management Agency Cause
Source: CRS using data from USDA Risk Management Agency
of Loss data files, downloaded June 15, 2021.
Summary of Business database, downloaded August 23, 2021.
Notes: Amounts are not adjusted for inflation. Years are crop years.
Note: Excludes price and margin coverage for dairy and livestock.
Indemnities paid in 2019 exclude supplemental payments to
prevented planted acres authorized under the Additional
FCIP Support for Natural Disasters
Supplemental Appropriations for Disaster Relief Act of 2019 (P.L.
Between 2011 and 2020, droughts, floods, storms, and other
116-20). See Figure 3 notes for explanations of each loss category.
related conditions accounted for the majority of FCIP acres
Issues for Congress
with losses (Figure 3) and indemnities paid (Figure 4).
Indemnities were paid for natural disaster events with
Between 2011 and 2017, Congress did not provide
federal disaster designations and declarations, for other
supplemental assistance for agricultural production losses.
adverse weather and growing conditions, and for other
FCIP indemnities provided the bulk of disaster support,
causes of loss. Widespread drought in 2012 and 2013
including for the widespread drought conditions in 2012-
contributed to the relatively high levels of acres impacted
2013 and flooding in 2015. Since 2018, Congress has
by losses and total indemnities paid in those years. Spring
appropriated ad hoc funds to compensate for certain losses
flooding and overly wet conditions caused the majority of
related to natural disasters occurring in 2017-2019. Bills
FCIP indemnities paid in 2015 and 2019.
introduced in the 117th Congress would continue or expand
this ad hoc assistance (e.g., H.R. 267 and S. 2599). USDA
Figure 3. FCIP Insured Acres with Losses
used the appropriated funds to augment support available
from the FCIP and to compensate producers who had not
purchased coverage through the program. Farmers who
received these payments were required to purchase two
years of coverage from the FCIP or through the Noninsured
Crop Disaster Assistance Program. For an overview of this
assistance, see CRS In Focus IF11539, Wildfires and
Hurricanes Indemnity Program (WHIP). Congress may
consider the impact on farmers’ purchases of FCIP
coverage of continuing or expanding ad hoc assistance.
Farmers planting insurable crops choose whether to
purchase FCIP insurance and the coverage level. Data
indicate that farmers purchase less FCIP coverage in areas
where premiums are more expensive, which tends to occur
Source: CRS using data from USDA Risk Management Agency Cause
in areas with relatively higher risks of crop losses. CAT
of Loss data files, downloaded June 15, 2021.
coverage is the least expensive FCIP policy that farmers
Notes: Years are crop years. “Drought, Heat, and Related” includes
can purchase. The federal government pays 100% of the
premium; farmers pay an administrative fee. If Congress
losses due to drought, heat, failure of irrigation supply, excess sun,
considers enlarging the FCIP’s role in addressing natural
and hot wind. “Freeze, Cold, and Related” includes losses due to
frost, freezing temperatures, cold winter, and cold wet weather.
disasters, one option could be to reconceive CAT coverage
“Flood, Excess Moisture, and Related” includes losses due to excess
to better appeal to farmers in areas with higher risks of crop
moisture, excess precipitation, excess rain, and flood. “Hurricane,
losses.
Cyclone, Tornado, and Wind” includes losses due to hurricane,
tropical depression, wind, excess wind, cyclone, and tornado. “Price
Stephanie Rosch, Analyst in Agricultural Policy
https://crsreports.congress.gov
Federal Crop Insurance Program Support for Natural Disasters
IF11924
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