Introduction to Catastrophic Risk Protection (CAT)
Catastrophic Risk Protection, commonly referred to as CAT coverage, represents the minimum level of insurance available under the Multi-Peril Crop Insurance (MPCI) program. Established by the Federal Crop Insurance Corporation (FCIC) and managed by the Risk Management Agency (RMA), CAT coverage is designed to provide a basic safety net for producers against severe crop losses due to natural disasters.
While CAT coverage is the most affordable entry point into federal crop insurance, it is also the most restrictive. It is intended to help farmers survive a total or near-total disaster rather than to protect profit margins. For a deeper understanding of how this fits into the broader insurance landscape, see our complete Crop exam guide.
CAT Coverage Quick Facts
Understanding the 50/55 Formula
The core of CAT coverage is defined by its specific yield and price protection levels. Unlike "Buy-up" coverage, where producers can choose from various percentages, CAT coverage is fixed at the 50/55 level.
- 50% Yield Coverage: The insurance only triggers a loss payment if the actual yield falls below 50% of the producer's Actual Production History (APH). This means the farmer essentially self-insures the first 50% of their expected crop.
- 55% Price Election: If a loss occurs, the indemnity is calculated using only 55% of the established price for that crop year.
Because the payout is based on 55% of the price on only the production lost in excess of 50%, the effective protection is significantly lower than the actual market value of the crop. This makes CAT coverage a tool for disaster recovery rather than revenue stabilization.
CAT Coverage vs. Buy-Up Coverage
| Feature | CAT Coverage | Buy-Up Coverage |
|---|---|---|
| Coverage Level | Fixed at 50/55 | 50/100 up to 85/100 |
| Premium Cost | Fully Subsidized ($0) | Shared between Farmer/RMA |
| Administrative Fee | Required (higher fee) | Required (lower fee) |
| Revenue Protection | Not Available | Available |
| Eligibility for Options | Very Limited | Wide variety of endorsements |
Administrative Fees and Waivers
One of the most important aspects of CAT coverage for the practice Crop questions is the administrative fee structure. Although the federal government pays 100% of the premium for CAT coverage, the producer is responsible for paying an administrative fee per crop, per county.
However, the RMA provides waivers for these fees to ensure that the program remains accessible to disadvantaged groups. Producers who qualify as Limited Resource Farmers, Beginning Farmers, or Veteran Farmers may have the administrative fees waived entirely, provided they submit the necessary documentation by the sales closing date.
Linkage Requirements
Producers should be aware that participating in certain other USDA programs, such as disaster assistance programs, often requires the producer to have at least CAT-level insurance on all insurable crops of economic significance in the county. This is known as the linkage requirement. Failing to maintain this coverage can disqualify a producer from receiving emergency supplemental benefits.
Limitations and Exclusions
CAT coverage is not available for all insurance plans or crops. For example, Revenue Protection (RP) and Revenue Protection with Harvest Price Exclusion (RP-HPE) are not available at the CAT level; CAT is strictly a yield-based (APH) protection. Additionally, some specialty crops and specific endorsements (like the Hail or Fire exclusion) are incompatible with CAT-level policies.
Furthermore, CAT coverage is always written on an Administrative Unit basis. This means that if a farmer has land in multiple sections of a county, they cannot separate them into different units for loss adjustment purposes under a CAT policy; all land for that crop in the county is treated as a single unit.