I have seen quite a few companies and agencies promoting “captives” as a sound alternative to federally re-insured crop insurance. Suggesting a farmer’s best risk management strategy may be situated in a group of like-minded producers, who self-insure through the help of a licensed insurance company, thus bypassing commercially sold insurance products.
So that leads me to ask…
“Is a captive really the best option? Are solid foundations of discounted federal crop insurance being built? Are these “large” farmers fully leveraging their federally re-insured options? Would minimizing or eliminating the “large” farmers participation in federal crop insurance create a risk spread that could significantly increase many other farmers’ premiums who fully depend on federal crop insurance as their affordable safety net?”
Building your farm’s safety net by first maximizing your federal crop insurance benefits continues to be your best, most secure risk management solution out there. With federal crop insurance participation at more than 80%, removing a large mass of acreage or even minimizing their participation in the program could lead to sky rocketing premiums and even reduce risk spread necessary for affordable solutions with the diverse commodities that have just recently become insurable with the FCIC programs. After building a solid foundation utilizing what currently exists in the federal crop insurance program, you then find there are still gaps in your risk management – now we can turn to the diverse solutions that exist in the private crop insurance arena for additional coverage.
So before you start chasing after the latest shiny penny, double check what you are doing with your crop insurance agent. Ask yourself, “Is there more out there for federal crop insurance options that I can leverage today? Are there existing private crop insurance solutions that make sense for me?” AND maybe ask yourself, “If I am being led after the shiny new penny… maybe I need a new agent that really invests into ensuring I know my options and takes the time to execute on sound principals, and not just a new sale.”
—- Travis Stewart, ABIS Mankato