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Catastrophic crop insurance

A component of the federal crop insurance program, authorized by the Federal Crop Insurance Reform Act of 1994, that compensates farmers for crop yield losses exceeding 50% of their average historical yield at a payment rate of 60% of the projected season average market price. CAT coverage requires that a farmer realize a yield loss of more than 50% and only makes payments on losses exceeding the 50-percent threshold. Producers pay no premium for CAT coverage, but except for cases of financial hardship must pay an administrative fee of $50 per crop, up to a maximum of $200 per county and $600 in total (across all counties) for CAT protection. Under the Reform Act of 1994 producers were required to obtain coverage at the CAT (or higher) level for crops of economic significance (accounting for 10% or more of their farmís crop production value) in order to be eligible for various other USDA program benefits. The FAIR Act of 1996 relaxed this requirement. A producer has the ability to purchase additional insurance coverage beyond CAT coverage, but must pay a premium, partially subsidized by the government, for that additional coverage.


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