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Insurance fund

The Farm Credit System Insurance Corporation (FCSIC), 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 used to finance the operations of the Farm Credit System.

The insurance fund represents FCSIC’s equity, which equals the difference between total assets and total liabilities, including insurance obligations, if any. FCSIC is a federal government entity and its insurance fund is part of the federal government’s assets. FCSIC maintains and replenishes the insurance fund by collecting annual insurance premiums from System banks and through investment returns (the insurance fund is exclusively invested in U. S. Treasury securities). FCSIC is statutorily required to maintain the Insurance Fund at 2 percent of the amount of adjusted insured debt outstanding jointly issued by the Farm Credit System banks. (Click this link for a discussion of the secure base amount under “General information”). 

FCSIC’s insurance premiums are set with the goal of reaching and maintaining the 2 percent secure base amount at the end of each calendar year.  However, if growth of insured debt is greater than forecast when premium rates are established or the insurance fund is used for some authorized purpose, the insurance fund will end the year below the secure base amount and FCSIC will need to collect additional premiums in the following year to make up the shortfall. (Click this link for a discussion under “Insurance premiums”).

If growth of insured debt is less than forecast when insurance premium rates are set, then the insurance fund may end the year above the secure base amount. Then the excess insurance fund above the secure base amount minus insurance obligations and the anticipated operating expenses for the coming year will be allocated to “allocated insurance reserve accounts” (AIRAs).  Congress established these accounts for the benefit of the System banks and holders of Financial Assistance Corporation (FAC) stock in accordance with the formula specified in the Farm Credit Act.  Once FCSIC determines that the allocation is appropriate and that the funds in the AIRAs are not otherwise needed, FCSIC may pay the amounts in the AIRAs to the account holders. 

Since FCSIC’s inception in 1989, its insurance fund has grown from the initial seed money of $260 million from the United States Treasury to more than $4 billion. The Farm Credit System began paying premiums in 1989. The chart below shows balances of the Insurance Fund and the growth rates since 2000. 

Chart showing the FCSIC Insurance Fund balance in relation to the Fund growth rate from 2000 to 2021. The growth rate in 2021 was just over 9% and the fund was $5.5 billion dollars.

How has the insurance fund been used?

There has never been a default on an insured debt security issued by the Farm Credit System banks, so the insurance fund has not been used for that purpose. There is less than $1 million borrower stock that FCSIC continues to guarantee.  FCSIC paid $231 million out of the insurance fund in 2005 to help retire certain FAC obligations that pre-dated FCSIC. FCSIC also paid a total of $42.7 million to remaining FAC stockholders in 2010 and 2012 in accordance with the statutory formula directing FCSIC to distribute excess amounts in the insurance fund. In 2018, as part of a distribution of excess insurance funds, FCSIC paid $13.1 million to FAC stockholders to retire all remaining FAC stock.  With this payment, FCSIC has completed its statutory obligation to pay $55.8 million to retire all outstanding FAC shares and the FAC stockholders’ AIRA account will be closed.

The following chart summarizes how the insurance fund has been utilized:
Ensure the timely payment of principal
and interest on insured obligations in
the event of default by an
insured System bank


Ensure the retirement of eligible
borrower stock at par value


Provide funds for payment of
FAC obligations

$231 Million

Retire FAC stockholders' shares

$55.8 million