On March 12, 2020, the Risk Management Agency (RMA) issued a press release entitled “USDA is Working to Reduce Insurance Rates for Farmers Impacted by 2019 Breached Levees.” https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2020-News/USDA-is-Working-to-Reduce-Insurance-Rates-for-Farmers-Impacted-by-2019-Breached-Levees. RMA is telling farmers to look at the impacts that the 2019 breaches may have had on premium rates when making their crop insurance decisions. RMA states that many of the levees breached are in the process of being repaired but if the repairs are not completed to prior specifications the cropland behind may have the highest premium rates. RMA states that it is adding flexibility by adjusting the premium rates if repairs are competed and certified by the sales closing date or earliest planting date.
RMA also states that it will consider rate adjustments in counties where the levees are temporarily or partially repairs if the repairs are certified by the U.S. Army Corps of Engineers (USACE) or a state registered and licensed engineers. RMA states that the adjustment will be based on the level of protection the levee repair provides. RMA states that even if the repairs are completed after the sales closing date or earliest planting date but before the crop is planted, the producers can request a written agreement from RMA’s Regional Offices, who can determine premium on a case-by-case basis. RMA states that 179,874 acres have had their rates reduced doe to the USACE certifications. RMA states that it will continue to update rate maps to reflect current levee conditions and the applicable premium rates.
ANALYSIS – It title of the article appears to be misleading since it implies that RMA itself is doing something to reduce premium rates as opposed to calculating premium rates based on the risk. However, reading the article, it appears that RMA is not doing anything other than simply adjusting the premium rates to reflect the reduced risks as USACE repairs the levees. RMA’s continual monitoring of the situation and updating the ratings maps will benefit producers who would otherwise receive the highest rates. Provided that such rates continue to be adjusted based on the risks and are not adjusted after the crop has been planted, there does not appear to be any moral hazard or adverse affect on the program.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.