Federal Crop Insurance: Fruits, Vegetables and Specialty Crops

Federal Crop Insurance: Fruits, Vegetables and Specialty Crops

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Updated May 11, 2022
Federal Crop Insurance: Fruits, Vegetables and Specialty Crops
For decades, Congress has sought to expand federal crop
on average). Premium subsidies received by all U.S.
insurance coverage for fruits, vegetables, and other
agricultural producers totaled $6.3 billion in 2020. Total
specialty crops—starting with changes enacted in the 1990s
insurance protection (liability) for all federally insured
through farm bill legislation in the Agriculture
crops (excluding livestock) was $114 billion in 2020.
Improvement Act of 2018 (P.L. 115-334), in addition to
administrative efforts at the U.S. Department of Agriculture
Specialty Crop Coverage
(USDA). These efforts expanded the scope of the Federal
In statute, the term specialty crops refers to “fruits and
Crop Insurance Program (FCIP) and broadened policy
vegetables, tree nuts, dried fruits, and horticulture and
coverage so that policies are now available for a wide range
nursery crops (including floriculture)” (7 U.S.C. 1621
of commodities. Historically, FCIP has primarily covered
note). This definition covers roughly 400 agricultural
traditional field crops (such as wheat, corn, and soybeans).
commodities, including fresh and processed fruits and
Although specialty crops now account for a larger and
vegetables, tree nuts, nursery plants (such as trees, shrubs,
growing proportion of farmers’ insured liability, field crops
flowering plants), herbs and spices, coffee and tea, and
continue to predominate (Figure 1).
honey and maple syrup, according to USDA guidelines.
Although various legislative and administrative changes
Federal Crop Insurance Coverage
have expanded federal crop insurance coverage for
FCIP provides farmers with risk management tools to
specialty crops, many crops still do not have crop-specific
address crop yield and/or revenue losses on their farms.
insurance policies. Currently, FCIP policies cover roughly
Under the program, farmers can purchase subsidized
80 types of fruits, vegetables, tree nuts, and nursery crops.
policies that pay an indemnity when their production or
revenue falls below a guaranteed level. The federal crop
Crops covered by individual FCIP plans include almonds,
insurance program is permanently authorized by the Federal
apples, avocados, bananas, blueberries, cabbage, chili
Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.).
peppers, citrus fruits and trees, coffee, cranberries,
USDA’s Risk Management Agency (RMA) operates the
cucumbers, fresh and dried beans and peas, figs, fresh
Federal Crop Insurance Corporation (FCIC), which is the
market beans, sweet corn, tomatoes, table grapes and
funding mechanism for the program. Insurance policies are
raisins, macadamia nuts and trees, mint, mustard, nursery
sold and completely serviced through approved private
crops (in containers), olives, onions, papaya, pears, pecans,
insurance companies. The insurance companies’ losses are
peppers, pistachios, popcorn, potatoes, processing beans,
reinsured by USDA, and their administrative and operating
pumpkins, most fresh and processing stonefruit (cherries,
costs are reimbursed by the federal government.
apricots, freestone and cling peaches, nectarines, fresh and
dried plums), strawberries, sweet corn, sweet potatoes, and
Figure 1. Total Insured Liability for Specialty Crops
walnuts. Apiaries are also covered. Participation is highest
Compared to All Crops, 1989-2020
in the leading specialty crop producing states, such as
California, Washington, Florida, Michigan New York, and
Oregon. Participation rates in these states range from about
50% to 70%, with up to 90% participation in Florida.
Federal crop insurance policies for specialty crops (and
other crops) are generally either yield-based or revenue-
based. For most yield-based policies, a producer can receive
an indemnity if there is a yield loss relative to the farmer’s
“normal” (historical) yield. Insurable causes of loss include
drought, excess precipitation, hail, frost, freeze, fire (if due
to natural causes), and insects and disease. Revenue-based
policies protect against crop revenue loss resulting from
declines in yield, price, or both. Nursery crop producers can

Source: CRS using RMA Summary of Business data (accessed March
be protected against plant damage or losses in value due to
2022). Data include Whole Farm Revenue Protection policies. Other
adverse weather, failure of irrigation water systems, fire,
information is available from RMA’s most recent annual Report to
and wildlife. Additional background is available in CRS
Congress, Specialty Crops Report 2021.
Report R45459, Federal Crop Insurance: Specialty Crops.
In purchasing a crop insurance policy, a producer selects a
Table 1 provides summary statistics of federal crop
level of coverage (i.e., deductible) and pays a portion of the
insurance coverage for specialty crops for 2018 through
premium—or none of it in the case of catastrophic
2020. It provides total premium, premium subsidies,
coverage—which increases as the level of coverage rises.
producer-paid premium, liabilities, indemnities (claim
The federal government pays the rest of the premium (62%,
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payments), and the number of policies earning premium.
and thoroughness of the submission package presented to
Whereas premium subsidies across all commodities totaled
the board and the responsiveness of the submitter to issues
$6.2 billion, premium subsidies for specialty crops totaled
raised by the board and the reviewers, among other factors.
$765 million in 2020, or about 63% of total premium (on
In considering Section 508(h) submissions, the FCIC board
average across all specialty crops). Producer-paid premiums
is to evaluate whether the products are in the best interests
are the total premium less premium subsidies.
of producers, follow sound insurance principles, and are
actuarially appropriate. Once the FCIC board approves a
Total liability, or the estimated value of the insured portion
new product, it is often implemented as a pilot program in a
of the crop, is a useful measure of program growth.
limited area to test it for effectiveness while limiting
Compared with the late 1980s when specialty crop insured
financial exposure. Products designated as pilot programs
liabilities totaled less than $1 billion, insured liabilities
are those involving new policies for a previously uninsured
totaled nearly $19.3 billion in 2020 (Table 1), reflecting
crop or crop type as well as new policies or plans of
increased production and participation. This amounted to
insurance created for previously insured cops. Pilot
21% of the liability for all federally insured crops and
programs typically operate for four years but may be
livestock of $114 billion in 2020 (Figure 1).
extended for additional testing if needed.
Table 1. Summary of Federal Crop Insurance
USDA may reimburse certain costs for research and
Coverage, Specialty Crops (2018-2020)
development of approved Section 508(h) policies. Private
submitters are eligible to recoup maintenance costs for up

2018
2019
2020
to four years after a product is offered on the market if they
Total Premium ($millions)
$951
$947
$1,215
continue to provide support for the product. After that, the
Premium Subsidies ($millions)
$596
$591
$765
private entity may choose to turn the product over to RMA,
Producer-Paid Premium ($millions) $355
$356
$450
relinquishing ownership rights of the product. Alternatively,
the private entity may retain ownership of the insurance
Liabilities ($billions)
$15.9
$16.7
$19.3
product and continue to update it in return for a user fee as
Indemnities ($millions)
$1,009 $869
$1,144
approved by the FCIC board and paid by Approved
Insurance Providers (AIPs) who sell the product to growers.
Policies Earning Premium (number) 54,506 54,816 56,214
Source: CRS using RMA Summary of Business data (accessed March
Continued Challenges
2022). Data include Whole Farm Revenue Protection policies.
Notes: Policies earning premium are policies that went into effect
Even though new crop insurance product introductions
and for which premium was due, as opposed to policies that
for specialty crops have been increasing, RMA and the
producers signed up for but did not ultimately purchase, or policies
industry continue to face a number of challenges when
that were cancelled or did not go into effect for other reasons.
developing and making available new policies for
specialty crops. Most challenges stem from how the
Crops without insurance include artichokes, asparagus,
specialty crop industry is structured, which is often
black/boysenberries, broccoli, carrots, cashews, chives,
characterized by relatively small acreages, multiple
cauliflower, celery, dates, eggplants, garlic, hazelnuts, most
crop varieties, products targeting niche markets, and
melons, squash, tart cherries, most leafy greens, leeks, most
differences in farming practices. This contributes to
herbs and spices, some tropical plants, and most root crops.
greater complexity and cost, quality and price discovery
Some specialty crops may be covered under a Whole Farm
issues, non-weather risks, and coverage limitations
Revenue Protection insurance policy, intended to fill in
related to developing and marketing new products.
coverage gaps for producers of uninsured crops that lack
individual policy coverage and for producers marketing to
Data availability and data quality often pose a challenge for
local, farm-identity preserved, or direct markets. The
developing crop insurance products, particularly lack of
Noninsured Crop Disaster Assistance Program may also
reliable pricing data for specialty crops not traded on
provide an alternative option for some producers, along
commodity exchanges. Crops grown and marketed in
with supplemental agricultural disaster assistance programs.
smaller quantities or targeting niche markets often
command a price premium, resulting in highly variable
New Product Development
market prices and complicating price discovery. For a
Most new crop insurance products for specialty crops tend
policy to be viable, a crop must have established cultivars,
to be developed by private entities and submitted to RMA
defined production practices, developed markets, and
through procedures specified in Section 508(h) of the
known perils. Marketing claims for some crops—such as
Federal Crop Insurance Act (7 U.S.C. §1508(h)), rather
sustainably or organically grown, or other process claims—
than being developed internally by RMA (7 U.S.C. §1522).
further contribute to product complexity. Most specialty
Section 508(h) governs new crop insurance policy
crops are intended for sale in the higher-value fresh market,
development, including how it is contracted out and funded,
and are perishable and nonstorable, unlike traditional field
how policy ratings are undertaken, and how a policy may
crops. Significant producer interest (demand for a policy) is
start as a pilot and possibly evolve to an insurance policy.
also critical. Factors such as these affect the potential
marketability, actuarial soundness, and feasibility of an
As authorized, private-sector entities may conduct research
insurance policy.
and development of new insurance products and features,
Renée Johnson, Specialist in Agricultural Policy
and submit these to the FCIC board for review. All new
products must be approved by the FCIC board. This process
IF10765
can take up to a year and generally depends on the quality
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Federal Crop Insurance: Fruits, Vegetables and Specialty Crops

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