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1 1 (July 21, 2022)

handle is hein.crs/goveifr0001 and id is 1 raw text is: Congressional Research Service informing the Iegislative debate since 1914 Updated July 21, 2022 Federal Crop Insurance Program Support for Natural Disasters Natural disasters-events such as severe droughts, floods, and storms-can cause crop and animal production losses as well as other physical and financial losses for farm operations. The Federal Crop Insurance Program (FCIP) offers farmers the opportunity to purchase insurance against financial losses caused by certain adverse growing and market conditions. By insuring against adverse growing conditions, FCIP policies may also indemnify farmers for financial losses caused by certain natural disaster events. The extent to which the FCIP indemnifies farmers for losses related to natural disasters depends on the type of disaster, 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 disaster designation or declaration to trigger payments. 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 assistance programs designed to address agricultural losses following a natural disaster. For an overview of these programs, see CRS In Focus 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. Coverage Availability FCIP coverage is available for purchase in all U.S. counties. The FCIP insures most field crops, a wide variety of specialty crops, and grazing lands. Coverage must be purchased before a natural disaster 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 or between 0% and 65% of average county yields. Higher levels of yield coverage and revenue 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 adverse 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, and Prevented Planting. The federal government fully subsidizes premiums for CAT coverage. Farmers pay an increasing share of the premiums for higher levels of coverage, up to a maximum of 62% of the total premium. In addition to their share of premium costs, farmers pay administrative fees per crop per county. Federal outlays for the FCIP averaged $8.1 billion per year from FY2011 to FY2021. Coverage Purchased From 2011 to 2021, the total acreage insured through the FCIP increased from 266 million to 444 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 disasters when they occur. Figure I. FCIP Acres Insured by Coverage Level 500 Millions S9%or more 300 - - - - - -, 75 70% 05% 1000 50 CD CD 0 a C, Z 9 Q D C Catastropic N rq N cq N N rlt N N N Source: CRS using data from USDA Risk Management Agency Summary of Business database, downloaded July 11, 2022. Notes: Years are crop years. Includes crops insured under acreage policies only. Catastrophic includes yield 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 from the program when natural disasters occur. States in the Midwest, as well as California and Texas, had the largest crop values insured by the FCIP in 2021 (Figure 2).

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