Mandatory Spending Option

Function 350 - Agriculture

Reduce the Expected Rate of Return for Insurers in the Crop Insurance Program

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

The federal government realizes both losses and gains from its share of underwriting in the crop insurance program, as governed by the terms of the Standard Reinsurance Agreement (SRA) between the government and the private-sector crop insurance providers. From 2000 through 2016, the government has realized a net loss of $1.4 billion.

Lawmakers might choose to instruct that those terms in the SRA be renegotiated with the aim of lowering the expected rate of return for crop insurance companies by an average of 2 percentage points. This option would decrease federal spending from 2018 through 2027 by $1.4 billion, CBO estimates.