Public-Private Partnerships (PPPs) are a common approach for offering agricultural insurance, but their stability can be threatened by asymmetric information, which allows private insurers to strategically transfer risk to the public sector. This study quantifies the economic value of routine premium rate updates in mitigating the ability of private insurers to extract economic rents via underwriting gains within the U. S. Federal Crop Insurance Program (FCIP). Using a counterfactual simulation on program data from 2001-2024, we model potential underwriting gains for private insurers by counterfactually simulating underwriting gains in a scenario where premium rating updates are delayed. Results indicate that forgoing a single annual rate update would allow private insurers to capture an additional 1. 3 billion in underwriting gains on average, equivalent to 17% of total premiums.
Francis, et al. (Thu,) studied this question.