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Throughout Crop Insurance history, the corporation has seen years of surpluses and deficits. In the surplus years, producers saw premiums decrease; in years where consecutive large payouts occurred, premiums have increased.
Since 2002, the Crop Insurance Program has paid over $2.1 billion to Saskatchewan producers, while collecting $1.6 billion in premium from producers and governments. Because of large payouts in 2001 to 2004, the deficit at the end of 2004 was $627 million. However, the corporation has been able to pay down its deficit for the fourth consecutive year, reducing it to $173 million heading into 2008.
For the Crop Insurance program to be sustainable over the long-term, the premiums collected must be sufficient to cover claim payments over time. Base premium rates are revised annually to reflect the financial position of the program and are established for each crop based on defined risk zones. An independent actuary certifies the premium rate formula to maintain financial soundness of the program so that it is sustainable into the future.
A portion of each premium dollar is designated to address debt recovery or held in reserve for those years when claims are high. Premium stability is maintained by spreading financial gain or loss across the entire base of customers.
Reinsurance is required in years where total claim dollars paid exceeds total premiums collected and any previously accumulated surpluses. The federal and provincial governments currently provide Crop Insurance’s reinsurance. The corporation borrows the required funds from them to ensure all eligible claims are paid.
Premiums are not used to pay corporate administration costs but are entirely for the purpose or paying claims or reinsurance costs.
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