The Hagstrom Report

Agriculture News As It Happens


EWG study points out foreign ownership of crop insurance

Eight of the 20 largest crop insurance companies operating in the United States are foreign-owned and have been receiving U.S. government subsidies to provide crop insurance to American farmers, according to a study released today by the Environmental Working Group.

The company that has received the most U.S. government funding is Wells Fargo, a U.S. company, but the second on the list is ACE Ltd., a Swiss company, and the third is QBE Insurance Group, an Australian company.

Other crop insurance companies are based in Ireland, Bermuda, Japan and Canada. One is based in Puerto Rico, a U.S. territory.

EWG headlined a news release, “Foreign companies paid billions to run U.S. crop insurance program.” At a news conference, Scott Faber, EWG vice president for government affairs, said he wanted to raise the question of whether taxpayers should ask Congress to make cuts in “farmer premium subsidies and [payments] to foreign insurance companies.”

But under questioning, Faber said that EWG had noted the foreign ownership only to “highlight the bigger story” and would not make a distinction, noting that his organization wants Congress to take “a hard look at subsidies to insurance companies whether foreign or domestic.”

The EWG study did note that 71 percent of the crop insurance budget goes to American farmers for crop insurance subsidies, 16 percent to crop insurance agents and 13 percent goes to the companies.

Congress and the Obama administration have already put limits on payments to crop insurance companies’ underwriting gains and capped payments to agents to deliver the policies, although overall crop insurance costs have risen to about $9 billion to $10 billion per year because the value of crops had risen and along with them the cost of insuring the crops.

In all, the federal government pays about 65 percent of the cost of the crop insurance program.

National Crop Insurance Services, a Kansas City-based group that does research for the crop insurance companies, said in a statement today that the EWG report is very misleading and has errors.

“For example, administrative and operating reimbursements from the USDA are spent in the United States, underpinning 12,500 licensed U.S. crop insurance agents and 5,000 certified U.S. crop loss adjusters,” NCIS said.

“In fact, the companies spend more on delivery costs here in the United States than they receive in delivery payments from the government,” NCIS said. “And while some crop insurance companies are foreign owned, such as by international reinsurers, an international presence in U.S. insurance markets is quite common. Most lines of property and casualty insurance in the United States involve foreign insurance and reinsurance companies, as global diversification is necessary in insurance to counter balance risks among industries and countries around the world.”

“Such a reinsurance presence has become particularly important for crop insurance because of the large amount of risk capital that companies are mandated by the U.S. government to have on hand in the unlikely event of back-to-back-to-back catastrophic crop years,” NCIS said.

NCIS also noted that crop insurance is popular with farmers, bankers and Congress.

“It seems odd that the Environmental Working Group — in its continuing effort to discredit production agriculture and a farm safety net — has set its sights on a policy designed by Congress to minimize taxpayer risk exposure while speeding relief to farmers when they need it the most,” NCIS said.

“This successful public-private partnership proved its worth last year amidst unprecedented weather disaster by keeping thousands of farmers and ranchers in business, and it will prove important again this year if there are droughts, floods, or other catastrophic events.”