US government aid to crop insurers including Ace, XL and other re/insurers in Bermuda has drawn criticism.As part of a series looking at the US crop insurance programme, Bloomberg says the US government subsidies show how a programme created to safeguard the nation’s farmers “has evolved into a system that in most years all but guarantees profits for insurers”.Bloomberg says reinsurers have been increasingly entering the business.Starr Indemnity & Liability Co. is one of 18 companies approved to get federal cash for insuring farmers against loss of crops or income. Ace enjoys similar public backing.“In recent years, companies such as Everest Re Group Ltd. of Bermuda and Australia-based QBE Insurance Group Ltd. have acquired smaller companies that write farmers’ policies,” Bloomberg said.“Axis Capital Holdings Ltd. of Bermuda also said last year it planned to increase its crop reinsurance business.“For insurers and reinsurers alike, the crop business helps smooth financial results that rise and fall with other more cyclical insurance lines.”Crop insurance, administered by the US. Department of Agriculture’s Risk Management Agency, was established in 1938 to help farmers ride out droughts and disease.“Today an expanded programme directly subsidises government-approved insurers and indirectly benefits several other financial institutions — many based in tax-advantaged venues such as Bermuda or Switzerland — that reinsure those risks,” Bloomberg said.Bloomberg said crop insurers have banked underwriting gains — surplus premiums remaining after claims are paid — in all but two years since 1993.Ace’s credit worthiness was raised to “A” in 2010 by analysts at Standard & Poor’s. The insurer, headed by Evan Greenberg, reported $2.7 billion in net income last year.Other subsidy recipients include XL Group.Bloomberg said: “In 2006, chief executive officer Mike McGavick, 55, was a Republican Senate candidate in Washington state who inveighed against the “crippling national debt” and was endorsed by the Club for Growth, one of the conservative opponents of the crop insurance programme. Mr McGavick, through XL Group, declined a request for comment.”Many of the companies that write crop insurance policies are small parts of large financial institutions that don’t report results separately for their crop business.“One that does is Endurance Specialty Holdings Ltd. of Bermuda, which acquired crop insurer ARMtech Insurance Services Inc. in December 2007 for $125 million,” Bloomberg said.“Since then, the company has produced $110 million in operating profit, according to an August 29 Endurance securities filing. ARMtech of Lubbock, Texas, has ‘historically produced stable profits over time’, the filing said.Endurance declined an interview request.R Joe Taranto, CEO of Everest Re, which insures and reinsures crop exposure, told analysts in April: “We are expecting a normal year. A normal year means a very reasonable profit.”Last year, as drought devastated the farm belt, the program’s total premiums fell $6.2 billion short of farmers’ claims. The government absorbed $4.9 billion of that amount while the insurers paid $1.3 billion.The ballooning costs have been targeted by lawmakers in both parties.Representative Paul Ryan, the chairman of the House Budget Committee, has proposed cutting crop coverage subsidies as part of a $31 billion reduction over the next decade in farm expenditures.And the Obama administration also proposed cutting $11.7 billion from the programme over the next decade. New farm legislation approved in the House and the Senate, however, would expand the programme.* For the full story see Page 14 in today’s Business section.