Chapter 36, Subchapter I, Section 1508, Subsection (k) · 7 U.S.C. Chapter 36

Contents

(k)

(1)Notwithstanding any other provision of this subchapter, the Corporation shall, to the maximum extent practicable, provide reinsurance to insurers approved by the Corporation that insure producers of any agricultural commodity under 1 or more plans acceptable to the Corporation.

(2)The reinsurance shall be provided on such terms and conditions as the Board may determine to be consistent with subsections (b) and (c) and sound reinsurance principles.

(3)The reinsurance agreements of the Corporation with the reinsured companies shall require the reinsured companies to bear a sufficient share of any potential loss under the agreement so as to ensure that the reinsured company will sell and service policies of insurance in a sound and prudent manner, taking into consideration the financial condition of the reinsured companies and the availability of private reinsurance.

(4)

(A)Except as otherwise provided in this paragraph, the rate established by the Board to reimburse approved insurance providers and agents for the administrative and operating costs of the providers and agents shall not exceed—

(i)for the 1998 reinsurance year, 27 percent of the premium used to define loss ratio; and

(ii)for each of the 1999 and subsequent reinsurance years, 24.5 percent of the premium used to define loss ratio.

(B)A policy of additional coverage that received a rate of reimbursement for administrative and operating costs for the 1998 reinsurance year that is lower than the rate specified in subparagraph (A)(i) shall receive a reduction in the rate of reimbursement that is proportional to the reduction in the rate of reimbursement between clauses (i) and (ii) of subparagraph (A).

(C)Beginning with the 2002 reinsurance year, in the case of a policy or plan of insurance approved by the Board that was not reinsured during the 1998 reinsurance year but, had it been reinsured, would have received a reduced rate of reimbursement during the 1998 reinsurance year, the rate of reimbursement for administrative and operating costs established for the policy or plan of insurance shall take into account the factors used to determine the rate of reimbursement for administrative and operating costs during the 1998 reinsurance year, including the expected difference in premium and actual administrative and operating costs of the policy or plan of insurance relative to an individual yield policy or plan of insurance and other appropriate factors, as determined by the Corporation.

(D)Effective beginning with the 2012 reinsurance year, the Corporation shall reimburse approved insurance providers and agents for the allowable administrative and operating costs of the providers and agents as soon as practicable after October 1 (but not later than October 31) after the reinsurance year for which reimbursements are earned.

(E)In the case of a policy of additional coverage that received a rate of reimbursement for administrative and operating costs for the 2008 reinsurance year, for each of the 2009 and subsequent reinsurance years, the reimbursement rate for administrative and operating costs shall be 2.3 percentage points below the rates in effect as of the date of enactment of the Food, Conservation, and Energy Act of 2008 for all crop insurance policies used to define loss ratio, except that only ½ of the reduction shall apply in a reinsurance year to the total premium written in a State in which the State loss ratio is greater than 1.2.

(F)Notwithstanding subparagraphs (A) through (E), for each of the 2009 and subsequent reinsurance years, the reimbursement rate for area policies and plans of insurance widely available as of the date of enactment of this subparagraph or authorized under subsection (c)(4)(C) or section 1508b of this title shall be 12 percent of the premium used to define loss ratio for that reinsurance year.

(5)Consistent with section 118 of the Federal Crop Insurance Reform Act of 1994, and consistent with maintenance of program integrity, prevention of fraud and abuse, the need for program expansion, and improvement of quality of service to customers, the Board shall alter program procedures and administrative requirements in order to reduce the administrative and operating costs of approved insurance providers and agents in an amount that corresponds to any reduction in the reimbursement rate required under paragraph (4) during the 5-year period beginning on October 13, 1994.

(6)The determination of whether the Corporation is achieving, or has achieved, corresponding administrative cost savings shall not be subject to administrative review, and is wholly committed to agency discretion within the meaning of section 701(a)(2) of title 5.

(7)The Corporation shall submit to Congress a plan outlining the measures that will be used to achieve the reduction required under paragraph (5). If the Corporation can identify additional cost reduction measures, the Corporation shall describe the measures in the plan.

(8)

(A)Except as provided in subparagraph (B), notwithstanding section 536 of the Agricultural Research, Extension, and Education Reform Act of 1998 (7 U.S.C. 1506 note; Public Law 105–185) and section 148 of the Agricultural Risk Protection Act of 2000 (7 U.S.C. 1506 note; Public Law 106–224), the Corporation may renegotiate the financial terms and conditions of each Standard Reinsurance Agreement—

(i)to be effective for the 2011 reinsurance year beginning July 1, 2010; and

(ii)once during each period of 5 reinsurance years thereafter.

(B)

(i)Subject to clause (ii), subparagraph (A) shall not apply in any case in which the approved insurance providers, as a whole, experience unexpected adverse circumstances, as determined by the Secretary.

(ii)If Federal law is enacted after the date of enactment of this paragraph that requires revisions in the financial terms of the Standard Reinsurance Agreement, and changes in the Agreement are made on a mandatory basis by the Corporation, the changes shall not be considered to be a renegotiation of the Agreement for purposes of subparagraph (A).

(C)If the Corporation renegotiates a Standard Reinsurance Agreement under subparagraph (A)(ii), the Corporation shall notify the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate of the renegotiation.

(D)The approved insurance providers may confer with each other and collectively with the Corporation during any renegotiation under subparagraph (A).

(E)

(i)As part of the Standard Reinsurance Agreement renegotiation authorized under subparagraph (A)(i), the Corporation shall consider alternative methods to determine reimbursement rates for administrative and operating costs.

(ii)Alternatives considered under clause (i) shall include—

(I)methods that—

(aa)are graduated and base reimbursement rates in a State on changes in premiums in that State;

(bb)are graduated and base reimbursement rates in a State on the loss ratio for crop insurance for that State; and

(cc)are graduated and base reimbursement rates on individual policies on the level of total premium for each policy; and

(II)any other method that takes into account current financial conditions of the program and ensures continued availability of the program to producers on a nationwide basis.

(F)

(i)The Board shall ensure that any Standard Reinsurance Agreement negotiated under subparagraph (A)(ii) shall—

(I)to the maximum extent practicable, be estimated as budget neutral with respect to the total amount of payments described in paragraph (9) as compared to the total amount of such payments estimated to be made under the immediately preceding Standard Reinsurance Agreement if that Agreement were extended over the same period of time;

(II)comply with the applicable provisions of this subchapter establishing the rates of reimbursement for administrative and operating costs for approved insurance providers and agents, except that, to the maximum extent practicable, the estimated total amount of reimbursement for those costs shall not be less than the total amount of the payments to be made under the immediately preceding Standard Reinsurance Agreement if that Agreement were extended over the same period of time, as estimated on February 7, 2014; and

(III)in no event significantly depart from budget neutrality unless otherwise required by this subchapter.

(ii)To the extent that any budget savings are realized in the renegotiation of a Standard Reinsurance Agreement under subparagraph (A)(ii), and the savings are determined not to be a significant departure from budget neutrality under clause (i), the savings shall be used to increase reimbursements or payments described under paragraphs (4) and (9).

(9)Effective beginning with the 2011 reinsurance year, the Corporation shall make payments for underwriting gains under this subchapter on—

(A)for the 2011 reinsurance year, October 1, 2012; and

(B)for each reinsurance year thereafter, October 1 of the following calendar year.

(10)

(A)Beginning with the 2026 reinsurance year, and for each reinsurance year thereafter, in addition to the terms and conditions of the Standard Reinsurance Agreement, to cover additional expenses for loss adjustment procedures, the Corporation shall pay an additional administrative and operating expense subsidy to approved insurance providers for eligible contracts.

(B)In the case of an eligible contract, the payment to an approved insurance provider required under subparagraph (A) shall be the amount equal to 6 percent of the net book premium.

(C)In this paragraph:

(i)The term “eligible contract”—

(I)means a crop insurance contract entered into by an approved insurance provider in an eligible State; and

(II)does not include a contract for—

(aa)catastrophic risk protection under subsection (b);

(bb)an area-based plan of insurance or similar plan of insurance, as determined by the Corporation; or

(cc)a policy under which an approved insurance provider does not incur loss adjustment expenses, as determined by the Corporation.

(ii)The term “eligible State” means a State in which, with respect to an insurance year, the loss ratio for eligible contracts is greater than 120 percent of the total net book premium written by all approved insurance providers.

(11)

(A)Beginning with the 2026 reinsurance year, and for each reinsurance year thereafter, the rate of reimbursement to approved insurance providers and agents for administrative and operating expenses with respect to crop insurance contracts covering agricultural commodities described in section 101 of the Specialty Crops Competitiveness Act of 2004 (7 U.S.C. 1621 note; Public Law 108–465) shall be equal to or greater than the percentage that is the greater of the following:

(i)17 percent of the premium used to define loss ratio.

(ii)The percent of the premium used to define loss ratio that is otherwise applicable for the reinsurance year under the terms of the Standard Reinsurance Agreement in effect for the reinsurance year.

(B)In carrying out subparagraph (A), the Corporation shall not reduce, with respect to any reinsurance year, the amount or the rate of reimbursement to approved insurance providers and agents under the Standard Reinsurance Agreement described in clause (ii) of such subparagraph for administrative and operating expenses with respect to contracts covering agricultural commodities that are not subject to such subparagraph.

(C)The requirements of this paragraph and the adjustments made pursuant to this paragraph shall not be considered a renegotiation under paragraph (8)(A).

(12)

(A)Subject to subparagraph (B), beginning with the 2026 reinsurance year, and for each reinsurance year thereafter, the Corporation shall increase the total administrative and operating expense reimbursements otherwise required under the Standard Reinsurance Agreement in effect for the reinsurance year in order to account for inflation, in a manner consistent with the increases provided with respect to the 2011 through 2015 reinsurance years under the enclosure included in Risk Management Agency Bulletin numbered MGR–10–007 and dated June 30, 2010.

(B)The increase under subparagraph (A) for the 2026 reinsurance year shall not exceed the percentage change for the preceding reinsurance year included in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.

(C)An increase under subparagraph (A)—

(i)shall apply with respect to all contracts covering agricultural commodities that were subject to an increase during the period of the 2011 through 2015 reinsurance years under the enclosure referred to in that subparagraph; and

(ii)shall not be considered a renegotiation under paragraph (8)(A).

United States Government work; public domain under 17 U.S.C. § 105.