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Updated July 21, 2022
Federal Crop Insurance Program Support for Natural Disasters
Natural disasters—events such as severe droughts, floods,
yields. Higher levels of yield coverage and revenue
and storms—can cause crop and animal production losses
coverage are available in 5% increments. For some policies,
as well as other physical and financial losses for farm
coverage may exceed 85%. To mitigate against farmers’
operations. The Federal Crop Insurance Program (FCIP)
tendency to take on extra risk after purchasing insurance
offers farmers the opportunity to purchase insurance against
(i.e., moral hazard), no policies provide 100% loss
financial losses caused by certain adverse growing and
coverage.
market conditions. By insuring against adverse growing
conditions, FCIP policies may also indemnify farmers for
Additionally, certain annual crops may be eligible for FCIP
financial losses caused by certain natural disaster events.
indemnities if adverse weather and other naturally
The extent to which the FCIP indemnifies farmers for
occurring conditions prevent timely planting. For details
losses related to natural disasters depends on the type of
about these payments, see CRS Report R46874, Federal
disaster, the type of FCIP policy purchased, and the level of
Crop Insurance Program (FCIP): Replanting, Delayed
coverage selected by the producer.
Planting, and Prevented Planting.
The FCIP is permanently authorized under the Agricultural
The federal government fully subsidizes premiums for CAT
Adjustment Act of 1938 (P.L. 75-430, 52 Stat. 72) and the
coverage. Farmers pay an increasing share of the premiums
Federal Crop Insurance Act of 1980 (P.L. 96-365, 7 U.S.C.
for higher levels of coverage, up to a maximum of 62% of
§§1501 et seq.), as amended. It has permanent, indefinite
the total premium. In addition to their share of premium
funding authority. The FCIP does not require a federal
costs, farmers pay administrative fees per crop per county.
disaster designation or declaration to trigger payments.
Federal outlays for the FCIP averaged $8.1 billion per year
FCIP insurance policies are priced according to their
from FY2011 to FY2021.
actuarial ratings. The federal government subsidizes the
premiums that farmers pay for these insurance policies to
Coverage Purchased
encourage farmer participation in the program. For more
From 2011 to 2021, the total acreage insured through the
information, see CRS Report R46686, Federal Crop
FCIP increased from 266 million to 444 million acres
Insurance: A Primer.
(Figure 1). The share of acres insured at higher coverage
levels also increased over this period. Both of these trends
In addition to the FCIP, the U.S. Department of Agriculture
have increased the aggregate support that the FCIP can
(USDA) offers a number of assistance programs designed
provide for natural disasters when they occur.
to address agricultural losses following a natural disaster.
For an overview of these programs, see CRS In Focus
Figure 1. FCIP Acres Insured by Coverage Level
IF10565, Federal Disaster Assistance for Agriculture.
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.
Source: CRS using data from USDA Risk Management Agency
Coverage Availability
Summary of Business database, downloaded July 11, 2022.
FCIP coverage is available for purchase in all U.S. counties.
Notes: Years are crop years. Includes crops insured under acreage
The FCIP insures most field crops, a wide variety of
policies only. Catastrophic includes yield coverage only. Other
specialty crops, and grazing lands. Coverage must be
coverage levels include yield and revenue coverage.
purchased before a natural disaster event.
States with higher crop values insured under the FCIP are
For most crops insured under the FCIP, coverage is
likely to receive more support from the program when
measured in relation to average yields or revenues.
natural disasters occur. States in the Midwest, as well as
Catastrophic (CAT) coverage provides indemnities when
California and Texas, had the largest crop values insured by
realized crop yields are between 0% and 50% of average
the FCIP in 2021 (Figure 2).
farm yields or between 0% and 65% of average county
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Federal Crop Insurance Program Support for Natural Disasters
Figure 2. Crop Values Insured by the FCIP in 2021
yields and revenues. “All Others” includes losses due to hail, fire,
insect damage, disease, and other insurable perils.
Figure 4. FCIP Indemnities Paid by Loss Type
Source: CRS using data from USDA Risk Management Agency
Source: CRS using data from USDA Risk Management Agency Cause
Summary of Business database, downloaded July 11, 2022.
of Loss data files, downloaded July 12, 2022.
Note: Excludes price and margin coverage for dairy and livestock.
Notes: Amounts are not adjusted for inflation. Years are crop years.
Indemnities paid in 2019 exclude supplemental payments to
FCIP Support for Natural Disasters
prevented planted acres authorized under the Additional
Between 2011 and 2021, droughts, floods, storms, and other
Supplemental Appropriations for Disaster Relief Act of 2019 (P.L.
related conditions accounted for the majority of FCIP acres
116-20). See Figure 3 notes for explanations of each loss category.
with losses (Figure 3) and indemnities paid (Figure 3).
Indemnities were paid for natural disaster events with
Issues for Congress
federal disaster designations and declarations, for other
Between 2011 and 2017, Congress did not provide
adverse weather and growing conditions, and for other
supplemental assistance for agricultural production losses.
causes of loss. Widespread drought in 2012 and 2013
FCIP indemnities provided the bulk of disaster support,
contributed to the relatively high levels of acres impacted
including for the widespread drought conditions in 2012-
by losses and total indemnities paid in those years. Spring
2013 and flooding in 2015. Since 2018, Congress has
flooding and overly wet conditions caused the majority of
appropriated ad hoc funds to compensate for certain losses
FCIP indemnities paid in 2015 and 2019.
related to natural disasters occurring in 2017-2021,
including $10 billion from the Extending Government
Figure 3. FCIP Insured Acres with Losses
Funding and Delivering Emergency Assistance Act (P.L.
117-43). USDA 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
Source: CRS using data from USDA Risk Management Agency Cause
indicate that farmers purchase less FCIP coverage in areas
of Loss data files, downloaded July 12, 2022.
where premiums are more expensive, which tends to occur
Notes: Years are crop years. “Drought, Heat, and Related” includes
in areas with relatively higher risks of crop losses. CAT
losses due to drought, heat, failure of irrigation supply, excess sun,
coverage is the least expensive FCIP policy that farmers
and hot wind. “Freeze, Cold, and Related” includes losses due to
can purchase. The federal government pays 100% of the
frost, freezing temperatures, cold winter, and cold wet weather.
premium; farmers pay an administrative fee. If Congress
“Flood, Excess Moisture, and Related” includes losses due to excess
considers enlarging the FCIP’s role in addressing natural
moisture, excess precipitation, excess rain, and flood. “Hurricane,
disasters, one option could be to reconceive CAT coverage
Cyclone, Tornado, and Wind” includes losses due to hurricane,
to better appeal to farmers in areas with higher risks of crop
tropical depression, wind, excess wind, cyclone, and tornado. “Price
losses.
Decline” includes losses due to declines in market prices. “County
and Margin Policies” include losses due to declines in average county
Stephanie Rosch, Analyst in Agricultural Policy
IF11924
https://crsreports.congress.gov
Federal Crop Insurance Program Support for Natural Disasters
Disclaimer
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https://crsreports.congress.gov | IF11924 · VERSION 2 · UPDATED