SRA Negotiations in ‘Final Stages’

June 4, 2004

The U.S. Risk Management Agency has released the third draft in what it called the “final stages” of negotiations regarding the Standard Reinsurance Agreement that governs the federal crop insurance program.

Crop insurance is sold under a private-public in which the RMA acts as reinsurer and regulator while private carriers act as the primary insurers and marketers of the product to agricultural producers. The SRA is the contract between the companies and the insurers that determines how the companies operate and how much they are compensated.

A number of insurer trade groups have complained about the process of SRA negotiations, which have proceeded on an individual basis between the RMA and each carrier participating in the program—more than 30 so far, according to the agency. In the past, insurers were allowed to meet as a group to negotiate with the RMA. The agency said the change was necessary thanks to anti-trust concerns. Insurers’ lobbyists said the agency just wanted to ensure it had the upper hand in negotiations.

In this case, the SRA calls for a reduction of compensation of insurers by $36 million over two years, compared with the two earlier versions that called for cuts of $75 million and $41 million, respectively. According to a statement released by the RMA, the largest company in the program has already agreed in principle to sign the third draft version.

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