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1 1 (September 13, 2021)

handle is hein.crs/goveemq0001 and id is 1 raw text is: C s~si&n~I ~esa<4~ir~h Sarvice 9 September 13,2021 Federal Crop Insurance Program Support for Natural Disasters Natural dis asters-events such as s evere droughts, floods, and storms-cancause crop and animalproduction los ses as well as other physical and financial lo s ses for farm operations. The Federal Crop Insurance Program(FCIP) offers farmers the opportunity to purchase insurance against fmanciallosses caused by certain adverse growing and market conditions. By insuring against adverse growing conditions, FCIP policies may also indemnify farmers for financial losses causedby certain naturaldisaster events. The extent to which the FCIP indemnifies farmers for lo s s es related to natural dis asters depends on the type of dis as ter, the type of FCIP policy purchased, and the level of coverage selected by the producer. The FCIP is permanently authorized under the Agricultural Adjustment Act of 1938 (P.L. 75-430, 52 Stat. 72) and the Federal Crop Insurance Act of 1980(P.L. 96-365, 7 U.S.C. § § 1501 et seq.), as amended. It has permanent, indefinite funding authority. The FCIP does not require a federal dis aster designationor declaration to triggerpayments. FCIP insurance policies are priced according to their actuarial ratings. The federal government subsidizes the premiums that farmers pay for these insurance policies to encourage farmer participation in the program. For more information, see CRS Report R46686, Federal Crop Insurance:A Primer. In addition to the FCIP, the U.S. Department of Agriculture (USDA) offers a number of assistanceprograms designed to address agricultural los ses following a naturaldis aster. For an overview of theseprograms, see CRS In Focus IF10565, FederalDisasterAssistanceforAgriculture. insured Perils FCIP crop insurance policies insure against losses due to drought; heat; hail; excess moisture, precipitation, orrain; 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 oflos s. The policies also cover lackofirrigation water when causedby disasters or natural conditions. Certain policies insure againstlosses causedby declines in market prices. Coverage Availability FCIP coverage is available forpurchase in allU.S. counties. The FCIP insures most field crops, a wide variety of specialty crops, and grazing lands. Coverage must be purchased before a natural dis aster event. For most crops insured under the FCIP, coverage is measured in relation to average yields or revenues. Catastrophic (CAT) coverage provides indemnities when realized crop yields are between 0% and 50% of average farm yields orbetween0% and 65% of average county yields. Higher levels of yield coverage andrevenue coverage are available in 5% increments. For some policies, coverage may exceed 85%. To mitigate against farmers' tendency to take on extra risk after purchasing insurance (i.e., moral hazard), no policies provide 100% loss coverage. Additionally, certain annual crops may be eligible for FCIP indemnities if advers e weather and other naturally occurring conditions prevent timely planting. For details about these payments, see CRS Report R46874, Federal Crop Insurance Program (FCIP): Replanting, Delayed Planting, andPreventedPlanting. The federal government fully subsidizes premiums for CAT coverage. Farmers pay an increasing share of the premiums for higherlevels ofcoverage, up to a maximum of62% of the totalpremium. In addition to their share of premium costs, farmers pay administrativefees percrop percounty. Federaloutlays for the FCIP averaged $8.2billion per year fromFY2011 to FY2020. Coverage Purchased From2011 to 2020, the total acreage insured through the FCIP increased from266 million to 398 million acres (Figure 1). The share of acres insured at higher coverage levels also increased over this period. Both of these trends have increased the aggregate support that the FCIP can provide for natural dis asters when they occur. Figure 1. FCIP Acres Insured by Coverage Level 450 Millions 400 - .90% or moE 350 fll 5 300 m mf 5n5 Summaryof Business database, downloaded August 18,2021. Notes: Years are c rop years. In clu des c rops in su red u nder acreage policies only. Catastroph ic includesyield coverage only. Other coverage levels include yield and revenue coverage. States with higher crop values insured under the FCIP are likely to receive more support fromthe programwhen natural dis asters occur. States in the Midwest, as well as https i/crs repor [s ~eOrgress goo

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