Crop Insurance Model

The FAPRI Crop Insurance Model examines and projects the coverage, usage, performance, and expenditures for the U.S. crop insurance program. More about model structure...

Crop Insurance Outlook Summary

The number of net acres insured increased to 245.84 million acres in 2005 and is expected to increase to 247.45 million acres in 2006. Increases in insured acreage for rangeland for 2005 led to the record high insured acreage of 2005. Insured acreage follows the general pattern in planted area for the major crops after 2006.

Total premiums fell to $3.95 billion in 2005. In 2006, total premium levels are expected to rebound to $4.1 billion because of increases in insurable crop prices for the revenue products, and premiums continue to trend upward after 2006, reaching $5.0 billion in 2015.

Premium subsidies fell to $2.3 billion in 2005. But premium subsidies also rebound in 2006 and trend upward over the period, reaching $2.9 billion in 2015.

Like 2004, there were no major crop disasters during 2005. Indemnities for the 2005 crop year are projected at $2.8 billion. Over the projection period, total indemnities follow a pattern similar to that of total premiums. Loss ratios of one indicate that “actuarially fair” premiums are being charged for the insurance products. These projections show that, overall, federal crop insurance will meet the loss ratio targets set by Congress.

Total obligations represent the federal government’s financial responsibility to crop insurance. They are the costs for crop insurance before considering any crop insurance revenues. Total obligations are equal to the sum of indemnities, delivery expenses, administrative and operating expenses, agent commissions, and other expenses. Total obligations for FY 2006 are projected to reach near $3.5 billion. By 2008, the federal government’s total financial obligation to crop insurance reaches more than $5 billion.

Net outlays take underwriting costs and crop insurance revenues into account. Net outlays are estimated at $2.9 billion for FY 2006. Outlays are expected to rise to $3.8 billion in 2007 and to rise steadily thereafter.

Budget authority is the amount the law allows the federal government to spend on a program. For crop insurance, it represents net outlays on a crop-year basis. Budget authority for FY 2006 is projected at $2.53 billion. Budget authority projections follow a pattern similar to that of net outlays.

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Contact Person:
Chad Hart
U.S. Policy and Insurance Analyst
569 Heady Hall
Telephone: 515-294-9911
Fax: 515-294-6336
chart@iastate.edu