In 2003, Canada revised its agricultural risk management programs, tte "Business Risk Management" element of the new Agricultural Policy Framework (APF) is composed of two main schemes: Production Insurance and Income Stabilization. tte Production Insurance (PI) scheme offers producers a variety of multiple-peril production or production value loss products similar to many of those sold in the United States. One major distinction, however, is that the Canadian program is marketed, delivered, and serviced entirely and jointly by federal and provincial government entities, although it is the provincial authorities who are ultimately responsible for insurance provision, ttis allows provinces some leeway to tailor products to fit their regions and to offer additional products. Production insurance plans are offered for over one hundred different crops, and provisions have been made to include plans covering livestock losses as well. Crop insurance plans are available based on either individual yields (or production value in the case of certain items, such as stone-fruits) or area-based yields. Unlike the U.S. program, Canadian producers are not allowed to separately insure different parcels but rather must insure together all parcels of a given crop type, ttis means that low yields on one parcel may be offset by high yields on another parcel when determining whether or not an overall production loss has occurred. Insurance can also be purchased for loss of quality, unseeded acreage, replanting, spot loss, and emergency works, tte latter coverage is a loss mitigation benefit meant to encourage producers to take actions that reduce the magnitude of crop damage caused by an insured peril. Cost sharing between the federal government and each province for the entire insurance program was fixed at 60:40, respectively, in 2006. Federal subsidies as a percentage of premium costs vary, however, from 60 percent for catastrophic loss policies to 20 percent for low deductible production coverage. Combined, the federal and provincial governments cover approximately 66 percent of program costs, including administrative costs, ttis is roughly equivalent to the percentage of total program costs borne by the federal government in the U.S. program. Provincial authorities are responsible for the solvency of their insurance portfolio. In Canada, the federal government competes with private reinsurance firms in offering deficit financing agreements to provincial authorities.
Beginning in 2004, the Canadian Agricultural Income Stabilization (CAIS) scheme replaced and integrated former income stabilization programs. CAIS is based on the producer production margin, where a margin is defined as "allowable farm income," including proceeds from production insurance minus "allowable (direct production) expenses." tte program generates a payment when a producer's current year production margin falls below that producer's reference margin, which is based on an average of the program's previous five-year margins, less the highest and lowest. One important feature of CAIS is that producers must participate in the program with their own resources. In particular, a producer is required to open a CAIS account at a participating financial institution and deposit an amount based on the level of protection chosen (coverage levels range from 70 percent to 100 percent of the "reference margin"). Once producers file their income tax returns, the CAIS program administration uses the tax information to calculate the producer's program year production margin. If the program year margin has declined below the reference margin, some of the funds from the producers' CAIS accounts will be available for withdrawal. Governments match the producers' withdrawals in different proportions for different coverage levels, tte total investment by federal and provincial governments for the "business risk management" programs is CANS1.8 billion per year. In 2004, approximately CANS600 million was provided by governments as insurance premium subsidies.
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