Former American International Group Inc. chief Maurice “Hank” Greenberg has a new business partner: the U.S. taxpayer.
Greenberg’s Starr Indemnity & Liability Co. is one of 18 companies approved to get federal cash for insuring farmers against loss of crops or income. Wells Fargo & Co. (WFC), the nation’s fourth-largest bank by assets, Zurich-based Ace Ltd. (ACE) and units of American Financial Group Inc. (AFG), Deere & Co. (DE) and Archer-Daniels-Midland Co. (ADM) all enjoy similar public backing.
The government subsidies show how a program created to safeguard the nation’s farmers has evolved into a system that in most years all but guarantees profits for insurers. In 2012, taxpayers spent $14 billion paying more than 60 percent of farmers’ insurance premiums, the companies’ operating costs and the lion’s share of claims triggered by a historic drought, according to the Congressional Research Service.
“What we’ve got is a money-laundering operation,” says Harwood Schaffer of the University of Tennessee’s Agricultural Policy Analysis Center. “It looks like we’re doing a free market thing and it’s not free market at all.”
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