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Frequently Asked Questions

Click on a category below for FAQs on the respective topic.

The Basics How FCSIC insurance works The Farm Credit System The Insurance Fund Premiums FCSIC operations Troubled System Institutions

Premiums

What are FCSIC’s objectives in managing the Insurance Fund?

Annual premiums are set with the goal of maintaining the Insurance Fund at the secure base amount and, if necessary, building back to that amount when the Fund falls below the 2% secure base amount.

How does FCSIC determine the amount of premiums to charge each year?

While the Insurance Fund “secure base amount” is set at 2% of adjusted insured debt, this does not mean that FCSIC charges System banks 2% each year. Instead, FCSIC charges the amount of annual premiums necessary to refill and maintain the Insurance Fund at the 2% secure base amount (i.e., the difference between what's already in the Fund and the amount needed to keep the Fund at the 2% level). The FCSIC Board has discretion to charge each bank a premium equal to between 0 and 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).

What does FCSIC consider when setting annual premium rates?

The FCSIC Board considers the following two factors when setting annual premium rates:

  1. The current level of the Insurance Fund and the amount of money and time needed to reach the secure base amount; and
  2. The risk that the Insurance Fund will need to be used in the next 12 months.

Can FCSIC charge System banks different rates based on size or other risk factors?

No. By statute, FCSIC must charge each bank the same percentage rate based on average outstanding obligations issued by the bank.

How does FCSIC determine the amount of debt on which premiums are based?

To determine the “average outstanding insured obligations issued by the bank for the calendar year,” FCSIC looks at principal and interest outstanding at quarter-ends as reported by FCS banks in their call reports submitted to the FCA. Additionally, each FCS bank files an annual certified statement with FCSIC listing the amount of the bank’s average outstanding insured obligations and average outstanding deductions.

What is deducted when calculating premiums?

In calculating the aggregate outstanding insured obligations, FCSIC must exclude 90% of federally guaranteed loans and investments made by FCS banks (and their affiliated associations and “other financing institutions” funded by an FCS bank) and 80% of state guaranteed loans and investments.

What constitutes a “government-guaranteed investment” that may be deducted from premium calculations?

Under the Farm Credit Act, an investment that is either directly issued by, or directly guaranteed by, the U.S or any state government is deductible from FCSIC premium calculations. Securities issued by a private entity backed by government-guaranteed collateral (sometimes referred to as “pass through” or “structured” obligations) DO NOT meet this definition and may not be deducted from premium calculations.

When does FCSIC set premiums?

FCSIC’s Board sets the premium accrual rate each February (after year-end information is available) for the coming year. FCSIC’s Board reviews the premium assessment schedule at least semiannually and may use its discretion to adjust the premium assessments in response to changing conditions.

When do banks pay the premiums?

System banks make one annual premium payment by January 31 for the prior year’s premiums.

Do System associations pay premiums?

No. While associations do not directly pay premiums, each bank is authorized to pass along the cost of insurance premiums to its affiliated associations and other financing institutions that receive funding from the bank so long as it does so in an “equitable manner” (as determined by FCSIC). If an association believes its district bank is not allocating the premium cost equitably, it can bring the issue to the attention of the FCSIC Board for review.

What happens if the Insurance Fund exceeds the secure base amount at the end of the year?

FCSIC's premiums are set with the goal of reaching and maintaining the 2% secure base amount. 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. If growth of insured debt is less than forecast when premium rates are set, then the Insurance Fund may end the year above the secure base amount.

If the Insurance Fund exceeds the 2% secure base amount at the end of any calendar year, FCSIC allocates those amounts, minus operating expenses and insurance obligations, to “allocated insurance reserve accounts” (AIRAs) established for the benefit of the System banks. Once FCSIC determines that the allocation is appropriate and that the funds in the AIRAs are not otherwise needed, FCSIC’s Board may direct payment of the amounts in the AIRAs to the account holders. FCSIC has returned in excess of $855 million in refunds to the System since 2009, including $123 million in April 2024.