Renegotiating the terms and conditions of the Standard Reinsurance Agreement (SRA) is by far the paramount issue confronting the private-sector, multi-peril crop insurance delivery industry this year. While the SRA solely is an agreement between the U.S. Department of Agriculture's (USDA) Federal Crop Insurance Corporation (FCIC), as supervised by the Risk Management Agency (RMA), and the approved insurance providers (AIP), there is great interest in the final product by all parties involved in the federal crop insurance program because of inherent financial and related consequences.
For purposes of establishing the scope of this article, the term "all parties" includes not only USDA (the federal government) and the AIPs (the companies), it also includes reinsurance companies, agencies, brokers and, yes, farmers. Additionally, as the title suggests, the subject of this article is lobbying of the 2011 SRA. Although some provisions may be referenced, there is no intent to describe, analyze or explain the many SRA provisions or the pros and cons of any particular provision.
As is commonly known, AACI is strictly a lobbying organization. Thus, the thought giving origin to this article is that an early account of the lobbying surrounding the 2011 SRA might be useful, although the final product may be a long way from completion. It should be noted that other organizations conduct lobbying activities on behalf of the federal crop insurance program (the program), as well. AACI and many of these other organizations work together as an informal coalition is support of SRA lobbying activities.
At this point, it may be useful to make a distinction regarding the work of the National Crop Insurance Services (NCIS). As an organization, NCIS is solely responsible for working with the administration regarding AIPs' input on program administration, regulation and compliance, including the SRA negotiations. Thus, as a program expert, NCIS is called on by Congress to provide testimony from time to time, but NCIS does not engage in strict lobbying. In support of the negotiations on the 2011 SRA, NCIS organized 5 company working groups to provide input on the following areas of the agreement: (1) financial provisions (administrative and operating expense (A&O) payments and risk sharing, (2) plan of operations (Appendix II), (3) information technology and data (Appendix (III), (4) quality standards and control (relevant part of Appendix IV), and (5) education and training (relevant part of Appendix IV). Therefore, it is through the combined efforts of these 5 company working groups that NCIS generates formal responses to SRA proposals by USDA. To date, using this system, NCIS has submitted two formal responses—one prior to the first USDA draft and one following the first draft. Currently, NCIS is working on a response to the second USDA draft of the 2011 SRA.
On the strict lobbying front for the SRA, actually, the first work was begun in the development of the 2008 Farm Bill. At that time, all USDA authority to renegotiate the financial terms and conditions of the SRA had expired. In lobbying to contain program budget reductions in the Farm Bill, it was finally agreed Congress would include only certain reductions to A&O payment provisions and would re-establish USDA's SRA re-negotiation authority. The logic at the time was that the administrative negotiation process could likely produce better results on the highly technical gain and loss provisions than could the congressional amendment process, especially if USDA was required to consult independently and collectively with the insurance companies—the AIPs.
Toward satisfying this objective, the actual Farm Bill language states, in part, "the Corporation may renegotiate the financial terms and conditions of each Standard Reinsurance Agreement—(i) to be effective for the 2011 reinsurance year beginning July 1, 2010; and (ii) once during each period of 5 reinsurance years thereafter." Most importantly, the Farm Bill language further provides, "The approved insurance providers may confer with each other and collectively with the Corporation during any renegotiation …"
Although not required by the Farm Bill language because it states "the Corporation may…," USDA elected to renegotiation the SRA terms and conditions effective for the 2011 reinsurance year, producing a first draft on December 4, 2009 and a second draft on February 23, 2010. NCIS has about 30 days to utilize its 5 working groups to generate a response to the second draft.
Confronted by the most organized, far-reaching and persistent SRA lobbying campaign by any administration in the history of the program, including multiple briefings for Members of Congress, congressional staff, the media and commodity and farm organizations, AACI and other interested organizations have responded to the challenge. Talking points have been developed and circulated. Member and congressional staff briefings have been conducted. Grassroots "action alerts" have been generated and distributed.
However, the administration appears to be driven by an ideology that does not allow for positive responses to facts. In spite of a published list of objectives for the new SRA, the practical goal, as reflected in the content of the first 2 drafts, seems to be that only of cutting the crop insurance program budget and using the money to fund other programs. That is, the goal appears to be none other than to change USDA priorities away from support of programs that have a long history as a safety net for production agriculture, regardless of the inherent value to farmers, consumers and taxpayers. In short, this message is a large part of the congressional lobbying activities by AACI and other industry organizations.
In response to industry activities, a number of letters and other forms of communication have been directed to the administration, especially regarding the size of the proposed program budget reductions. Although the projected budget reduction that would be extracted by the second 2011 SRA draft at $6.9 billion is slightly less than the first draft's projection of $8.4 billion, the latest proposed cut in financial support to the program by USDA remains more than 3 to 4 times the level of cuts rejected by Congress in the 2008 Farm Bill debate.
To date, communications to USDA regarding its SRA proposal include a joint letter by more than 2 dozen senators, individual letters by at least 3 senators, a joint letter by almost 40 representatives, several individual letters by representatives and a joint letter by commodity and farm organizations. The commodity and farm organization letter served to put the farmer's view of the proposed SRA on record. In addition to letters, a number of personal congressional discussions have occurred.
With the 2011 SRA negotiations not yet completed, lobbying activities by AACI and other industry organizations will continue. However, the campaign is an uphill battle. The administration is in a position to simply stonewall the process. Even without a direct vote on the SRA, Congress is the only force that can cause the administration to yield on the radical provisions offered in the first two drafts. Working with Congress to provide the necessary information regarding the consequences of a bad SRA has never been more important or timely.
Join the lobbying effort today. If you have been active already, continue and consider doing more. It is the only ingredient in the negotiation process that can make a significant difference in some of the more radical financial proposals for the 2011 SRA.
Who does the lobbying?
As is the case for all associations, there is a relationship or commitment between AACI members and AACI the association. Let's examine this commitment. The following list of reasons for belonging to a trade association was published by an unknown author:
- I owe it to myself and my business to help my industry move forward at the regional, state, and national levels.
- It takes strength in numbers—more can be accomplished collectively than individually.
- The cost of belonging is small compared with what I get in return.
- The meetings provide ideas and information that I could obtain in no other way.
- I can obtain communications and publications prepared with my business interests in mind.
- Even when other problems command my full attention, the association officers, directors, and staff keep working on my behalf.
- I develop business contacts and friends among the members.
Although each item on the list may not apply with equal weight in all organizations because of differences that can and do exist in purposes and goals, collectively it does a good job of providing a broad definition of relevant commitments of associations to their members. But I want to call your attention to another aspect of the definition that clearly sets forth a 360 degree circular aspect of the member-association commitment relationship. Look again at the first item in the list: "I owe it to myself and my business to help my industry move forward …"
One way to consider the organization commitment question is to recognize that there is a two-way path: first, the association is the membership and, secondly, the membership is the association. The significance of this point is that to generate the maximum impact lobbying, both the association and the membership must be active.
As staff, we will always strive to keep AACI not only active, but at the forefront of lobbying on behalf of the program. I encourage you to do the same and urge your colleagues to get involved also. In this regard, contributions to AACI-PAC are very important, but that type of support is only one way to help lobbying. Another way to lobby that is equally important, if not more so, is direct communication with your three elected Members of Congress—two senators and one representative. Call, write and meet with them often. Multiply your influence by being a catalyst for your industry colleagues to get involved, as well.