Agricultural Programs

• protect producers' incomes from the vagaries of weather, pests, and global markets
• encourage risk mitigation strategies for emerging risk areas
• support growth, diversification, increased value-added activity in Canadian agriculture

• Production Insurance (PI): manage production risks inherent to the industry
• Canadian Agricultural Income Stabilization (CAIS): mitigate unforeseen income disruptions as well as promote long-term income stability

• losses covered: PI covers uncontrollable production losses; it does not cover market price drops, fuel price increase, or other input costs
• CAIS takes these factors into account at the farm enterprise level
• under CAIS, PI payments are treated as farm income, and included in reference margin

PI minimizes income losses caused by natural hazards like drought, flood, wind, frost, excessive rain/heat, snow, as well as uncontrollable disease, insect infestations, wildlife damage

• constitutionally, insurance is a provincial responsibility
• provincial government agencies act as the insurer, delivering the plans to producers
• program is cost-shared among the government of Canada, government, producers
• governments contribute 2/3 to ensure it's universally available and affordable

• quality loss protection
• reseeding benefits: e.g. crop destroyed early in the season
• unseeded acreage benefits: e.g. excessive moisture during planting
• emergency work benefit: costs incurred to mitigate further damages
• perennial plant protection
• spot-loss peril protection for events such as hail causing damages readily discernible
• compensation to crops and livestock caused by wildlife

• participation is voluntary, however once a commodity is selected, all production of that commodity must be insured
• must buy insurance either before a commodity is planted or before any damage is possible
• production guarantee is generally established for each commodity based on area or normal or expected yield per unit, relative to previous production history
• historical average can be adjusted to accommodate latest trends, technological advances, buffering of abnormal yields
• government requires periodic independent actuarial certifications of all provincial methodologies used to establish protection levels to ensure they are reflective of the value of the commodity or the productive capability

• coverage ranges from 50% to 90% of normal or expected yield (70-80% most popular)
• deductibles ensure that producers are always responsible for the first loss
• premiums are calculated on a provincial basis for each crop
• larger provinces calculate premium rates for smaller areas of homogeneous risk
• premium is based on the long-term risk of crop losses (15 to 25 years)

• individual yield program: indemnify when total production of a crop is less than total production guarantee for the entire farm (low yields can be offset by other fields); cheaper because low yields in some fields can be offset by high yields in others.
• area-based or collective protection: average production is determined for a designated area. All producers in the area (irrespective of actual production) are compensated when the harvested yield for the area is below the production guarantee
• not based on yields: based on long-term loss level of the commodity

• federal covers 60% for cat loss, 36% for COMP production, 20% for high cost production
• total government participation is about 62% of total premium costs
• both government levels are also responsible for all administrative costs (60:40)

• approve provincial program proposals
• contribute a portion of the total premium and administrative costs
• develop national standards for maximum levels of coverage and benefits level
• provide reinsurance to provinces participating (AB, SK, MB, NB, NS)

• pay a significant portion of the premiums and administrative costs
• design and develop insurance plans
• promote and sell PI programs
• underwrite PI policies, setting of yields, determine premium rates, collect premiums
• adjust and verify crop losses to determine claim amounts to be paid
• provide an appeal process for producers
• bear responsibility for deficit via loans or reinsurance

• participate in the PI program by paying a portion of total premium costs
• comply with insurance contract requirements
• manage their crops in a normal manner
• suggest program revisions to administrators

• not involved in the delivery, but some do:
•    offer spot-loss hail and fire insurance for crops
•    offer protection for greenhouse crops
•    offer livestock mortality insurance
• some reinsurance companies provide reinsurance to provincial PI administrations

• over 350 PI plans are available for more than 100 different crops
• 50% of producers representing 65 to 70% of total crop acreage in Canada are insured
• 10 most frequently insured crops represent about 85% of the insurance program
• nationally, cumulative-loss-to-revenue ratio after 2003 is 0.99 (break-even)