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 Insurance Fund

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Insurance Premiums

Insurance Fund

 

The Farm Credit System Insurance Corporation (FCSIC or the Corporation), an independent Government-controlled corporation, insures the timely payment of principal and interest on the debt securities issued jointly by the four Farm Credit System Banks (Systemwide Debt Securities).  The Federal Farm Credit Banks Funding Corporation acts as agent for the four banks in issuing and marketing the Systemwide Debt Securities to the public.  The Insurance Fund represents the Corporation’s equity, the difference between total assets and total liabilities, including insurance obligations.  The Insurance Fund is comprised of an unallocated Insurance Fund, assets for which no specific use has been identified or designated, and five allocated Insurance Reserves Accounts (AIRAs).  There is one AIRA for each of the four system banks and one account for the Financial Assistance Corporation (FAC) stockholders.

Insurance premiums are assessed with the objective of maintaining the Secure Base Amount (SBA), defined in the Farm Credit Act as 2 percent of the aggregate outstanding insured obligations reduced by 90 percent of Federally guaranteed loans and investments and 80 percent of State guaranteed loans and investments, assuming the loans are in accrual status and the investments are not permanently impaired.  At yearend, any excess funds above the SBA are transferred to the AIRAs and may be subsequently paid to the account holders.  The AIRAs balance is recorded as part of the Insurance Fund and is available to satisfy insurance obligations until the Corporation disburses payments to the account holders.

 

Insurance Fund Relative to the SBA
December 31, 2013
($ in millions)

Unallocated Insurance Fund $3,496
AIRAs $0
      Total Insurance Fund $3,496

 

Secure Base Amount(SBA) $3,611
Amount above (below) SBA ($115)

 

The chart below traces the trend of the Insurance Fund amount relative to the 2 percent Secure Base Amount.

Trend of the Allocated and Unallocated Insurance Fund to
Adjusted Insured Debt Outstanding
December 31, 2013

Trend of the Allocated and Unallocated Insurance Fund to Adjusted Insured Debt Outstanding


A change in the secure base amount (SBA) calculation methodology requested by the Insurance Corporation was included in the Food, Conservation and Energy Act of 2008 and was effective May 2008.  The new methodology allows the deduction of Federal and state guaranteed investments from the SBA in a manner similar to that used for Federal and state guaranteed loans. 

Insurance premiums are assessed with the objective of maintaining the SBA, which is defined in the Farm Credit Act as 2% of adjusted insured obligations.  At yearend excess funds above the SBA are transferred to the Allocated Insurance Reserves Accounts (AIRAs).  The current $39.89 million AIRAs balance is recorded as part of the Insurance Fund and is available to satisfy insurance obligations until the Corporation disburses payment to the Farm Credit Banks and FAC stockholders.


Secure Base Amount Calculation
Results as of December 31, 2013
($ in millions)

Secure Base Amount Calculation

Assumptions:
       Systemwide Debt outstanding Source:
           FCA call reports for quarter end data.
           Funding Corporation System Debt Obligations Report for monthly data.
Accrued Interest Payable:
       
Quarterly amounts are from the Call Reports.

        Monthly amounts for Accrued Interest Payable is an estimate for systemwide bonds only.
        Discount note interest is included in the par balance reported by the Funding Corporation.
Federal and state guaranteed loans, and government-guaranteed investments balances are based on most recent quarter end final data.

 

 

FCSIC Insurance Fund & System Debt Levels
December 31, 2013
($ in millions)

FCSIC Insurance Fund & System Debt Levels


Secure Base Percentages

The Secure Base Percentage is the ratio of the Insurance Fund to adjusted outstanding insured obligations.  Those ratios asterisked include only the Unallocated Insurance Fund.   Beginning in the third quarter of 2008, the passage of the Food, Conservation, and Energy Act amended how the adjusted insured obligations (the denominator) are calculated.  Currently, adjusted insured obligations are 2 percent of aggregate insured obligations reduced by 90 percent of Federally guaranteed loans and investments and 80 percent of State guaranteed loans and investments, assuming the loans are in accrual status and the investments are not permanently impaired.  

2013

2012

2011

2010

2009

Qtr 1

1.96*

Qtr 1

2.00*

Qtr 1

2.01*

Qtr 1

2.11*

Qtr 1

1.84*

Qtr 2

1.98*

Qtr 2

1.98*

Qtr 2

2.07*

Qtr 2

2.14*

Qtr 2

1.90*

Qtr 3

1.99*

Qtr 3

1.96*

Qtr 3

2.15*

Qtr 3

2.11*

Qtr 3

2.04*

Qtr 4

1.94*

Qtr 4

1.93*

Qtr 4

2.00*

Qtr 4

1.99*

Qtr 4

2.00*

2008

2007

2006

2005

2004

Qtr 1

1.63 *

Qtr 1

1.72 *

Qtr 1

1.82 *

Qtr 1

1.96*

Qtr 1

1.94*

Qtr 2

1.65*

Qtr 2

1.73 *

Qtr 2

1.77 *

Qtr 2

1.93*

Qtr 2

2.00*

Qtr 3

1.74*

Qtr 3

1.71 *

Qtr 3

1.78 *

Qtr 3

1.87*

Qtr 3

2.01*

Qtr 4

1.77*

Qtr 4

1.68 *

Qtr 4

1.72 *

Qtr 4

1.83*

Qtr 4

1.97*

(*Unallocated Insurance Fund)

This summary is intended for general information only.  For additional information, please see the applicable law and regulations available on the Laws and Regulations page.