RMA RELEASES THIRD DRAFT OF THE STANDARD REINSURANCE AGREEMENT

Contact: James Callan (202) 720-8812
Raegan Weber (202) 720-6200

WASHINGTON, May 21, 2004 - USDA's Risk Management Agency (RMA) today released the third draft of the proposed 2005 Standard Reinsurance Agreement (SRA) for the Federal crop insurance program. This draft further reflects the comments, concerns, and suggestions of each company and other interested parties, including trade associations, Members of Congress, commodity groups, and the general public following the release of the second draft.

The draft underscores RMA's ongoing commitment to serving America's agricultural producers by ensuring the integrity and stability of the crop insurance program, and providing for the effective and efficient use of taxpayer dollars. A strong SRA is essential for a viable and effective risk management delivery system. RMA is again available for final consultations with companies and will accept comments from other interested parties over the next few weeks. The consultations will be concluded in early June to enable having a final SRA in place July 1.

"We are very appreciative of all the constructive feedback and we have carefully considered all the comments," said Ross J. Davidson, RMA Administrator. "This draft reflects our good faith effort to offer a Standard Reinsurance Agreement that strengthens the program, improves service to farmers and exercises fiscal responsibility."

RMA believes this proposal is responsive to a wide range of issues and concerns. Significant changes were made in several areas, including cost savings, the balance of risk sharing and program support in high-risk areas, and appropriate regulatory oversight provisions. Cost savings of $36 million would be phased in over two years.

This SRA maintains provisions to strengthen the crop insurance delivery system for farmers and improve accountability for companies operating in the system; provide a safe and reliable foundation for future expansion of the federal crop insurance delivery system; and reduce taxpayer burden and enhance program integrity by adopting more effective methods to prevent and help prosecute fraud, waste and abuse, potentially saving taxpayers additional millions of dollars.

Also Released:
Appendix I: Program Integrity Statement (PDF)
Appendix II: Plan of Operations (PDF)
Appendix III: Data Processing and Transmission Requirements - forthcoming
Appendix IV: Quality Standards and Control (PDF)

Background
The Standard Reinsurance Agreement is considered a cooperative financial assistance agreement between the Federal Crop Insurance Corporation (FCIC) and the insurance company named on the agreement. The FCIC is a wholly owned government corporation within the U.S. Department of Agriculture that is authorized to carry out all actions and programs authorized by the Federal Crop Insurance Act. The Risk Management Agency has been delegated authority to act on the behalf of the FCIC to deliver and administer all Federal crop insurance programs. Each reinsurance agreement establishes the terms and conditions under which the FCIC will provide subsidies and reinsurance on eligible crop insurance contracts sold or reinsured by the insurance company named in the agreement.