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FARM CREDIT SYSTEM INSURANCE CORPORATION

POLICY STATEMENT CONCERNING

INSURANCE PREMIUMS

DATED: JANUARY 27, 2022

Background 

The Farm Credit Act of 1971, as amended (Act) established the Farm Credit System Insurance 

Corporation (FCSIC or Corporation) to, among other things, insure the timely payment of 

principal and interest on Farm Credit System obligations.1 Section 5.55 of the Act mandates that 

the Corporation build and manage the Farm Credit Insurance Fund (Insurance Fund) to attain and 

maintain a secure base amount (SBA), defined as 2 percent of the aggregate outstanding insured 

obligations of all insured System banks (excluding a percentage of State and Federally 

guaranteed loans and investments) or such other percentage of the aggregate amount as the 

Corporation in its sole discretion determines is actuarially sound. The Farm Credit System 

Reform Act of 19962

 amended section 5.55 of the Act to establish in the Insurance Fund an 

Allocated Insurance Reserves Account (AIRA) for the benefit of each insured System bank and 

an AIRA for the Farm Credit System Financial Assistance Corporation (FAC) stockholders; 

allocate any excess balances above the SBA to these AIRAs; and make partial distributions of 

the excess funds in the AIRAs. Congress, by enactment of the Food, Conservation, and Energy 

Act of 2008 (FCE Act),3 amended the provisions of the Act that govern FCSIC premiums, the 

SBA, and AIRAs to incorporate the Corporation’s recommendations concerning calculation of 

premiums and the SBA, and the simplification of the provisions governing AIRAs. In 2009, the 

Corporation adopted final regulations implementing the amended provisions of the Act 

governing FCSIC premiums, the SBA and AIRAs.4

 

Section 5.55(a) of the Act provides that for any calendar year in which the Insurance Fund does 

not exceed the secure base amount, the premium due from any insured System bank shall be 

equal to 20 basis points (0.2%) of the adjusted amount of the “average outstanding insured 

obligations issued by the bank for the calendar year” (plus a 10 basis points (0.1%) surcharge for 

nonaccrual loans and other-than-temporarily impaired investments). Section 5.55(a)(3) of the 

Act gives FCSIC, in its sole discretion, authority to uniformly reduce the percentage charged to 

each System bank below the statutory 20 basis points. 

Applicability

The Act and FCSIC rules govern the calculation of the secure base amount, the determination of 

any excess above the SBA, the method for allocating any excess to the AIRAs, and the method 

for making payments from the AIRAs to accountholders. 

1 The Agricultural Credit Act of 1987, Pub. L. No. 100-233 (1988), amended the Farm Credit Act of 1971 to 

establish the Farm Credit System Insurance Corporation. (12 USC §§ 2277a-1 et seq.) 2 Pub. L. No. 104-105, 110 Stat. 162 (1996). 3 Pub. L. No. 110-234, Pub. L. No. 110-246, 122 Stat. 1651 (2008). 4 See 12 C.F.R. §§ 1410.3 – 1410.7. 
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This policy statement will govern how and when FCSIC will use its statutory discretion to set 

premiums below the statutory 20 basis points and to adjust premiums in response to changing 

conditions. 

Policy Statement

The Corporation’s Board of Directors (Board) will review the premium assessment rate at least 

semiannually to determine whether to exercise its discretion to adjust the premium assessments 

in response to changing conditions. In setting premiums, the Board’s objective is to achieve and 

maintain the statutory secure base amount in the Insurance Fund. 

As a basis for its decision the Board will consider the following: 

1. The current level of the Insurance Fund and the amount of money and time needed to reach 

the secure base amount. In making this determination, the Board should consider all relevant 

factors including: 

a. historical and anticipated growth in insured obligations (including consideration of 

multiple debt growth scenarios); and 

b. estimated premium and investment income.

2. The risk that the Insurance Fund will need to be used in the next 12 months. In making this 

determination, the Board should consider all relevant factors, including: 

a. risks arising from the general economy, including the impact of interest rates, 

inflation, labor markets, financial market conditions and other factors that may affect 

insured System banks and System borrowers; 

b. risks arising from the agricultural economy, including commodity prices, trade, 

government farm policy, climate risk to agriculture and other factors that may affect 

insured System banks and System borrowers; and 

c. risks arising from the Farm Credit System, including the financial condition of 

System institutions, the level and quality of capital, adequacy of System management, 

structural risks, operational risks and other factors that may affect insured System 

banks and System borrowers. 

The premium on adjusted average outstanding insured obligations will be set between zero and

the statutory rate of 20 basis points. The Board will not reduce the 10 basis points premium on 

the average principal outstanding on loans in nonaccrual status and the average amount 

outstanding of other-than-temporarily-impaired (OTTI) investments to continue providing an 

incentive for sound credit and investment practices.