Examining the Health of the U.S. Crop Insurance Industry
In late September the Risk Management Agency (RMA) of USDA released the results of commissioned studies that calculated the rate of return that U.S. crop insurance companies have received from selling multi-peril crop insurance (MPCI). Since 2000, the average annual rate of return on equity has been 19 percent. The study also estimated that a reasonable rate of return over the same time period for this line of business would be about 11 percent. One straightforward interpretation of this difference is that since 2000, the crop insurance industry has received a rate of return that is 72 percent higher than what would be needed to induce private companies to participate in the crop insurance program.