Crop insurance deadlines approaching to fill gaps
As Congress prepares to return from summer recess, the push to finish a Farm Bill gains strength and observers, including the insurance industry.
Tony Jesina: Actually, a little bit of both. The Farm Bill has made, you know, enhancements. So there's, for example, back in 2014, you know, that's when things like Supplemental Coverage Option came out or stacks for those that are kind of more on the south. Margin Protection was started as a pilot. And so those are some things that came as a result of legislation through the Farm Bill. but they also have a process called a 5OH process, which allows third parties to work with folks in the industry to create products that might fit that are may may adopt. And so we've seen as much usage of those types of third party groups, the five wage submitters, if you will, do create products as well.
Paul Yeager: I realized this is probably a couple of steps above you, but where is Farm Credit service as an industry that you're involved with? How close are you watching Farm Bill negotiations and offering suggestions of ways to make sure gaps are filled? Or improved?
Tony Jesina: Yes, Paul. You know, that's very timely, because we're going through that right now, the Farm Credit System, and Farm Credit Services America frontier Farm Credit, we watch it very, very closely, not only on a daily basis, but probably an hourly basis, we want to make sure we understand the parts of the farm bill that are being discussed that, you know, what are some ways to enhance it or improve it. So we offer suggestions at the same time, there's a lot of things in there that are really great, we want to make sure that we work hard to protect those, for example, crop insurance is the only safety net we really have in the Farm Bill. So we're gonna make sure that we do all we can to protect this critical tool for risk management for producers. So we want your very close,
Paul Yeager: do you find there still a political appetite for it?
Tony Jesina: Yes, there is. We'll see that it's the only bipartisan bill that really exists in Congress anymore, where you can get both sides of the aisle to agree on legislation, which that's getting you to become a short supply anymore, as far as one side want to work with the other. But the farm bill is one where you truly have bipartisan support.
Paul Yeager: And when you have hearings, field hearings are out there, I'm sure there's representatives of of your industry as a whole that are paying attention. Are you hearing certain lines pages, things are going to be? Have any issue getting passed? I mean, are there any other sticking points? Are you part of a sticking point, do you think?
Tony Jesina: Yeah, you know, there's, there's a lot of different titles, obviously, to the farm bill. So there's, you know, there's a lot of discussion, as far as each title as far as what's working well, and, you know, ways to enhance it, but probably the things that you hear about the most I have to deal with, like the reference prices, you know, that determined, you know, for example, you look at ARC and PLC, kind of the two federal programs as part of the Farm Bill, you know, the reference prices, are those gonna get adjusted or not? And so that's probably the biggest discussion right now, there's been a lot of discussion around some of the ad hoc disaster payments, and is there a way to make some tweaks to the safety net, whether it's crop insurance or other areas to maybe minimize some of that reliance on ad hoc programs and make something a little more reliable and more assurances for our producers?
Paul Yeager: Because the ad hoc items are the ones to me always seem the more political ones. Correct, than the bipartisan ones?
Tony Jesina: Yeah, that's, that is absolutely correct. When you look at just some of the recent ones, you have, you know, wildfires and hurricanes. And you know, those are very specific and tragic events that occur. But to get support for that, sometimes you've got to broaden the coalition and include maybe other elements or add things to the program, or to the cost of that disaster to get enough votes to get a pass. And that's where sometimes you get some challenges or, you know, just it's, it creates some challenges within the program to get things like that approved. And, and yet their safety nets that are there if people take advantage of like, for example, a good crop insurance program.
Paul Yeager: You mentioned those storms and hurricanes, wildfires, those are all hot topics in the insurance industry as a whole, where you have companies not writing certain policies in certain states. How does that drift over as a potential to to farmers and ranchers?
Tony Jesina: Yeah, Paul, a great question. And, you know, a couple of those examples are Florida and California, where you are seeing on the property and casualty side, you're starting to see some, you know, draw back into reduction in coverage or companies completely getting out of those markets. And, and so the impact that that potentially could have had For crop insurance, we keep a close eye on just the impact it has on reinsurance. And so while the federal programs like multiple crop insurance are, are fine, but it can start to impact things like some of your private products like hail and wind, because if the cost of reinsurance goes up, that cost gets borne across a broader market, if it's not within if it can't be contained within say, the property and casualty market, the reinsurance might be looking at having to raise rates on all types of reinsurance. Just because it's, you know, it's that's where capital is moving. And that can have an impact on, again, some of the private product rating, if you will, or even availability.
The full discussion will be released Tuesday as part of the MtoM podcast.