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2010 Premium Reduction and Payment of $39.9 Million in AIRA Balances – Memo to System
Board Reduces
Insurance Premiums for 2010
Premium Planning Guidance for 2010 – Memo to System
Midyear 2009 Premium Rate Review – Memo to the System
News Release 09-01 – Insurance Premium Increase for 2009
The Board reviews premium accrual rates as often as necessary, but at least semiannually. The review focuses on five factors:
- The level of the Insurance Fund relative to the secure base amount.
- Projected losses to the Insurance Fund.
- The condition of the System.
- The health of the agricultural economy.
- Risks in the financial environment.
For more details on premium calculations, see Section 5.55 of the Farm Credit Act of 1971, as amended.
The following chart shows premium rates for the past 10 years. Until June 30, 2008, insurance premiums were assessed on loans. However, passage of the Food, Conservation, and Energy Act in June amended that. Beginning on July 1, 2008, premiums are assessed on “adjusted insured obligations (defined above).”
Once the Insurance Fund attains the SBA, the law requires that premiums be reduced to the level necessary to maintain the Fund at the SBA.
*Premiums from January 1 to June 30, 2008 were assessed at 15 basis points on adjusted outstanding loans plus 25 basis points on non-accrual loans. Beginning July 1 through September 30, premiums were assessed at 15 basis points on adjusted outstanding insured debt plus 10 basis points on nonaccrual loans and other-than-temporarily impaired investments. From October 1 to December 31 the assessment rate increased to 18 basis points on adjusted outstanding insured debt plus 10 basis points on nonaccrual loans and other-than-temporarily impaired investments.
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.
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