II

106TH CONGRESS

1ST SESSION S. 529

To amend the Federal Crop Insurance Act to improve crop insurance coverage, to make structural changes to the Federal Crop Insurance Corporation and the Risk Management Agency, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 4, 1999

Mr. ROBERTS (for himself, Mr. KERREY, Mr. CRAIG, Mr. BURNS, Mr. HAGEL,

Mr. DASCHLE, Mr. CONRAD, Mr. BAUCUS, Mr. HARKIN, Mr. DORGAN,

Mr. GRASSLEY, and Mr. JOHNSON) introduced the following bill; which

was read twice and referred to the Committee on Agriculture, Nutrition,

and Forestry

A BILL

To amend the Federal Crop Insurance Act to improve crop

insurance coverage, to make structural changes to the

Federal Crop Insurance Corporation and the Risk Management Agency, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Crop Insurance for the 21st Century Act’’.

6 (b) TABLE OF CONTENTS.—The table of contents of

7 this Act is as follows:
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Sec. 1. Short title; table of contents.

TITLE I—CROP INSURANCE COVERAGE

Sec. 101. Payment of portion of premium by Corporation.

Sec. 102. Assigned yields.

Sec. 103. Multiyear disaster actual production history adjustment.

Sec. 104. Increasing coverage policy.

Sec. 105. Rating methodologies pilot program.

Sec. 106. Livestock insurance.

TITLE II—FEDERAL CROP INSURANCE CORPORATION AND RISK

MANAGEMENT AGENCY

Sec. 201. Board of Directors of Corporation.

Sec. 202. Office of Risk Management.

Sec. 203. Office of Private Sector Partnership.

Sec. 204. Adequate coverage for agricultural commodities.

Sec. 205. Fees for plans of insurance.

Sec. 206. Flexible subsidy pilot program.

1 TITLE I—CROP INSURANCE

2 COVERAGE

3 SEC. 101. PAYMENT OF PORTION OF PREMIUM BY COR4 PORATION.

5 (a) EXPECTED MARKET PRICE.—Section 508(c) of

6 the Federal Crop Insurance Act (7 U.S.C. 1508(c)) is

7 amended by striking paragraph (5) and inserting the fol8 lowing:

9 ‘‘(5) EXPECTED MARKET PRICE.—

10 ‘‘(A) IN GENERAL.—For the purposes of

11 this title, the Corporation shall establish or ap12 prove the price level (referred to in this title as

13 the ‘expected market price’) of each agricultural

14 commodity for which insurance is offered.

15 ‘‘(B) AMOUNT.—The expected market

16 price of an agricultural commodity—
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1 ‘‘(i) except as otherwise provided in

2 this subparagraph, shall be not less than

3 the projected market price of the agricul4 tural commodity, as determined by the

5 Corporation;

6 ‘‘(ii) may be based on the actual mar7 ket price of the agricultural commodity at

8 the time of harvest, as determined by the

9 Corporation;

10 ‘‘(iii) in the case of revenue and other

11 similar plans of insurance, shall be the ac12 tual market price of the agricultural com13 modity, as determined by the Corporation;

14 or

15 ‘‘(iv) in the case of cost of production

16 or similar plans of insurance, shall be the

17 projected cost of producing the agricultural

18 commodity, as determined by the Corpora19 tion.’’.

20 (b) PREMIUM AMOUNTS.—Section 508(d)(2) of the

21 Federal Crop Insurance Act (7 U.S.C. 1508(d)(2)) is

22 amended by striking subparagraph (C) and inserting the

23 following:

24 ‘‘(C) In the case of additional coverage at

25 greater than or equal to 65 percent of the re-
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1 corded or appraised average yield indemnified

2 at 100 percent of the expected market price, or

3 an equivalent coverage, but less than 75 percent

4 of the recorded or appraised average yield in5 demnified at 100 percent of the expected mar6 ket price, or an equivalent coverage, the amount

7 of the premium shall—

8 ‘‘(i) be sufficient to cover anticipated

9 losses and a reasonable reserve; and

10 ‘‘(ii) include an amount for operating

11 and administrative expenses, as determined

12 by the Corporation, on an industry-wide

13 basis as a percentage of the amount of the

14 premium used to define loss ratio.

15 ‘‘(D) In the case of additional coverage

16 equal to or greater than 75 percent of the re17 corded or appraised average yield indemnified

18 at 100 percent of the expected market price, or

19 an equivalent coverage, the amount of the pre20 mium shall—

21 ‘‘(i) be sufficient to cover anticipated

22 losses and a reasonable reserve; and

23 ‘‘(ii) include an amount for operating

24 and administrative expenses, as determined

25 by the Corporation, on an industry-wide
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1 basis as a percentage of the amount of the

2 premium used to define loss ratio.’’.

3 (c) PAYMENT OF PORTION OF PREMIUM BY COR4 PORATION.—Section 508(e) of the Federal Crop Insurance

5 Act (7 U.S.C. 1508(e)) is amended—

6 (1) by striking paragraph (1) and inserting the

7 following:

8 ‘‘(1) IN GENERAL.—

9 ‘‘(A) MANDATORY PAYMENTS.—For the

10 purpose of encouraging the broadest possible

11 participation of producers in the crop insurance

12 plans of insurance authorized to be insured or

13 reinsured under subsections (b) and (c), the

14 Corporation shall pay a part of the premium in

15 the amounts determined under this subsection.

16 ‘‘(B) DISCRETIONARY PAYMENTS.—In the

17 case of a plan of insurance approved by the

18 Corporation under subsections (a)(7) and (h),

19 the Corporation may pay a part of the premium

20 in the amounts not to exceed the amounts de21 termined under this subsection.’’; and

22 (2) in paragraph (2), by striking subparagraphs

23 (B) and (C) and inserting the following:

24 ‘‘(B) In the case of additional coverage less

25 than 65 percent of the recorded or appraised
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1 average yield indemnified at 100 percent of the

2 expected market price, or an equivalent cov3 erage, the amount shall be equal to the sum

4 of—

5 ‘‘(i) 45 percent of the amount of the

6 premium established under subsection

7 (d)(2)(B)(i); and

8 ‘‘(ii) the amount of operating and ad9 ministrative expenses determined under

10 subsection (d)(2)(B)(ii).

11 ‘‘(C) In the case of coverage at greater

12 than or equal to 65 percent of the recorded or

13 appraised average yield indemnified at 100 per14 cent of the expected market price, or an equiva15 lent coverage, but less than 75 percent of the

16 recorded or appraised average yield indemnified

17 at 100 percent of the expected market price, or

18 an equivalent coverage, the amount shall be

19 equal to the sum of—

20 ‘‘(i) 50 percent of the amount of the

21 premium established under subsection

22 (d)(2)(C)(i); and

23 ‘‘(ii) the amount of operating and ad24 ministrative expenses determined under

25 subsection (d)(2)(C)(ii).
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1 ‘‘(D) In the case of coverage equal to or

2 greater than 75 percent of the recorded or ap3 praised average yield indemnified at 100 per4 cent of the expected market price, or an equiva5 lent coverage, the amount shall be equal to the

6 sum of—

7 ‘‘(i) 55 percent of the amount of the

8 premium established for coverage at 75

9 percent of the recorded or appraised aver10 age yield indemnified at 100 percent of the

11 expected market price under subsection

12 (d)(2)(D)(i); and

13 ‘‘(ii) the amount of operating and ad14 ministrative expenses determined under

15 subsection (d)(2)(D)(ii).’’.

16 (d) CONFORMING AMENDMENT.—Section 508(h)(2)

17 of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(2))

18 is amended by striking the second sentence.

19 SEC. 102. ASSIGNED YIELDS.

20 Section 508(g)(2)(B) of the Federal Crop Insurance

21 Act (7 U.S.C. 1508(g)(2)(B)) is amended—

22 (1) by striking ‘‘assigned a yield’’ and inserting

23 ‘‘assigned—

24 ‘‘(i) a yield’’;
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1 (2) by striking the period at the end and insert2 ing ‘‘; or’’; and

3 (3) by adding at the end the following:

4 ‘‘(ii) a yield determined by the Cor5 poration, in the case of—

6 ‘‘(I) a person that has not been

7 actively engaged in farming for a

8 share of the production of the insured

9 crop for more than 2 crop years, as

10 determined by the Secretary;

11 ‘‘(II) a producer that produces

12 an agricultural commodity on land

13 that has not been farmed by the pro14 ducer; and

15 ‘‘(III) a producer that rotates a

16 crop produced on a farm to a crop

17 that has not been produced on the

18 farm.’’.

19 SEC. 103. MULTIYEAR DISASTER ACTUAL PRODUCTION HIS20 TORY ADJUSTMENT.

21 Section 508(g) of the Federal Crop Insurance Act (7

22 U.S.C. 1508(g)) is amended by adding at the end the fol23 lowing:

24 ‘‘(4) TRANSITIONAL ADJUSTMENT FOR DISAS25 TERS.—
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1 ‘‘(A) DEFINITION OF A PRODUCER THAT

2 HAS SUFFERED A MULTIYEAR DISASTER.—In

3 this paragraph, the term ‘a producer that has

4 suffered a multiyear disaster’ means a producer

5 that has suffered a natural disaster during at

6 least 3 of the immediately preceding 5 crop

7 years that resulted in a cumulative reduction of

8 at least 25 percent in the actual production his9 tory of the crop of an agricultural commodity.

10 ‘‘(B) ELIMINATION OF CERTAIN YEARS OF

11 PRODUCTION HISTORY.—Effective beginning

12 with the 2000 crop year, for the purpose of cal13 culating the actual production history for a crop

14 of an agricultural commodity, a producer that

15 has suffered a multiyear disaster with respect

16 to the crop may exclude 1 year of production

17 history for each 5 years included in the actual

18 production history calculation of the crop for

19 which the producer purchased crop insurance.

20 ‘‘(C) CORPORATION’S SHARE OF CHANGED

21 COSTS.—In the case of an exclusion under sub22 paragraph (B), in addition to any other author23 ity to pay any portion of premium, the Corpora24 tion shall pay—
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1 ‘‘(i) the portion of the premium that

2 represents the increase in premium associ3 ated with the exclusion;

4 ‘‘(ii) all additional indemnities associ5 ated with the exclusion; and

6 ‘‘(iii) any amounts that result from

7 the difference in the administrative and op8 erating expenses owed to an approved in9 surance provider as the result of an adjust10 ment in actual production history under

11 this paragraph.

12 ‘‘(D) INCREASE IN ACTUAL PRODUCTION

13 HISTORY AFTER EXCLUSIONS.—In the case of a

14 producer that has received an exclusion under

15 subparagraph (B), the Corporation shall not

16 limit the increase of the actual production his17 tory based on the producer’s actual production

18 of the crop of an agricultural commodity in suc19 ceeding crop years until the actual production

20 history for the producer reaches the level for

21 the crop year immediately preceding the first

22 year of the multiyear disaster.

23 ‘‘(E) TERMINATION OF EXCLUSION AU24 THORITY.—The authority to apply this para25 graph to a producer shall terminate with re-
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1 spect to the first crop year in which crop insur2 ance is available to the producer that ade3 quately insures against natural disasters that

4 occur in multiple crop years, as determined by

5 the Corporation.’’.

6 SEC. 104. INCREASING COVERAGE POLICY.

7 Section 508(h) of the Federal Crop Insurance Act (7

8 U.S.C. 1508(h)) is amended by striking paragraph (6) and

9 inserting the following:

10 ‘‘(6) INCREASING COVERAGE POLICY.—In the

11 case of a plan of insurance that includes coverage

12 for that percentage of coverage that is not covered

13 under other crop insurance plans offered under this

14 title, the Corporation may pay a portion of the pre15 mium of the policy in an amount not to exceed the

16 sum of—

17 ‘‘(A) the cost of administrative and operat18 ing expenses, as determined by Corporation;

19 and

20 ‘‘(B) the amount authorized under sub21 section (e)(2)(D)(i).’’.

22 SEC. 105. RATING METHODOLOGIES PILOT PROGRAM.

23 (a) IN GENERAL.—Section 508(h) of the Federal

24 Crop Insurance Act (7 U.S.C. 1508(h)) is amended by

25 striking paragraph (8) and inserting the following:
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1 ‘‘(8) RATING METHODOLOGIES PILOT PRO2 GRAM.—Not later than September 30, 2000, the Of3 fice of Risk Management shall—

4 ‘‘(A) review the methodologies that are

5 used to rate plans of insurance under this title;

6 and

7 ‘‘(B) enter into a contract with a person in

8 the private sector to develop new methodologies

9 for rating plans of insurance under this title

10 that take into account the lower risk pool of—

11 ‘‘(i) producers that elect not to par12 ticipate in the Federal crop insurance pro13 gram established under this title; and

14 ‘‘(ii) producers that elect only to ob15 tain catastrophic risk protection under

16 subsection (b).’’.

17 (b) CONFORMING AMENDMENT.—Section 507(c) of

18 the Federal Crop Insurance Act (7 U.S.C. 1507(c)) is

19 amended in the last sentence by striking ‘‘Nothing’’ and

20 inserting ‘‘Except as provided in section 508(h)(8), noth21 ing’’.

22 SEC. 106. LIVESTOCK INSURANCE.

23 Section 518 of the Federal Crop Insurance Act (7

24 U.S.C. 1518) is amended by striking ‘‘livestock and’’.
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1 TITLE II—FEDERAL CROP IN2 SURANCE CORPORATION AND

3 RISK MANAGEMENT AGENCY

4 SEC. 201. BOARD OF DIRECTORS OF CORPORATION.

5 Section 505 of the Federal Crop Insurance Act (7

6 U.S.C. 1505) is amended by striking subsection (a) and

7 inserting the following:

8 ‘‘(a) BOARD OF DIRECTORS.—

9 ‘‘(1) IN GENERAL.—The management of the

10 Corporation shall be vested in a Board subject to the

11 general supervision of the Secretary.

12 ‘‘(2) COMPOSITION.—The Board shall consist

13 of—

14 ‘‘(A) 2 members who are active agricul15 tural producers with or without crop insurance;

16 ‘‘(B) 1 member who is active in the crop

17 insurance business;

18 ‘‘(C) 1 member who is active in the rein19 surance business;

20 ‘‘(D) the Under Secretary for Farm and

21 Foreign Agricultural Services;

22 ‘‘(E) the Under Secretary for Rural Devel23 opment; and

24 ‘‘(F) the Chief Economist of the Depart25 ment of Agriculture.
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1 ‘‘(3) APPOINTMENT AND TERMS OF PRIVATE

2 SECTOR MEMBERS.—The members of the Board de3 scribed in subparagraphs (A), (B), and (C) of para4 graph (2)—

5 ‘‘(A) shall be appointed by, and hold office

6 at the pleasure of, the Secretary;

7 ‘‘(B) shall not be otherwise employed by

8 the Federal Government;

9 ‘‘(C) shall be appointed to staggered 4-year

10 terms, as determined by the Secretary; and

11 ‘‘(D) shall serve not more than 2 consecu12 tive terms.

13 ‘‘(4) CHAIRPERSON.—The Board shall select a

14 member of the Board described in subparagraph

15 (A), (B), or (C) of paragraph (2) to serve as Chair16 person of the Board.’’.

17 SEC. 202. OFFICE OF RISK MANAGEMENT.

18 Section 226A of the Department of Agriculture Reor19 ganization Act of 1994 (7 U.S.C. 6933) is amended—

20 (1) in subsection (a), by striking ‘‘independent

21 Office of Risk Management’’ and inserting ‘‘Office

22 of Risk Management, which shall be under the direc23 tion of the Board of Directors of the Federal Crop

24 Insurance Corporation’’; and
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1 (2) in subsection (b), by striking paragraph (1)

2 and inserting the following:

3 ‘‘(1) Assistance to the Board in developing, re4 viewing, and recommending plans of insurance under

5 section 508(a)(7) of the Federal Crop Insurance Act

6 (7 U.S.C. 1508(a)(7)) to ensure that each agricul7 tural commodity (including each new or speciality

8 crop) is adequately served by plans of insurance.’’.

9 SEC. 203. OFFICE OF PRIVATE SECTOR PARTNERSHIP.

10 (a) IN GENERAL.—The Federal Crop Insurance Act

11 is amended by inserting after section 507 (7 U.S.C. 1507)

12 the following:

13 ‘‘SEC. 507A. OFFICE OF PRIVATE SECTOR PARTNERSHIP.

14 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab15 lish and maintain in the Department an Office of Private

16 Sector Partnership, which shall be under the direction of

17 the Board.

18 ‘‘(b) FUNCTIONS.—The Office shall—

19 ‘‘(1) provide at least monthly reports to the

20 Board on crop insurance issues, which shall be based

21 on comments received from producers, approved in22 surance providers, and other sources that the Office

23 considers appropriate;

24 ‘‘(2)(A) review policies and materials with re25 spect to—
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1 ‘‘(i) subsidized plans of insurance author2 ized under section 508; and

3 ‘‘(ii) unsubsidized plans of insurance sub4 mitted to the Board under section 508(h); and

5 ‘‘(B) make recommendations to the Board with

6 respect to approval of the policies and materials;

7 ‘‘(3) administer the reinsurance functions de8 scribed in section 508(k) on behalf of the Corpora9 tion; and

10 ‘‘(4) perform such other functions as the Board

11 considers appropriate.

12 ‘‘(c) ADMINISTRATOR.—The Office shall be headed

13 by an Administrator who shall be appointed by the Sec14 retary.

15 ‘‘(d) STAFF.—The Administrator shall appoint such

16 employees pursuant to title 5, United States Code, as are

17 necessary for the administration of the Office, including

18 employees who have commercial reinsurance and actuarial

19 experience.’’.

20 (b) FUNDING.—Section 516 of the Federal Crop In21 surance Act (7 U.S.C. 1516) is amended—

22 (1) in subsection (a)(2)—

23 (A) in subparagraph (A), by striking

24 ‘‘and’’ at the end;
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1 (B) in subparagraph (B), by striking the

2 period at the end and inserting ‘‘; and’’; and

3 (C) by adding at the end the following:

4 ‘‘(C) salaries and expenses of the Office of

5 Private Sector Partnership.’’; and

6 (2) in subsection (b)(1)—

7 (A) in subparagraph (B), by striking ‘‘;

8 and’’ and inserting a semicolon;

9 (B) in subparagraph (C), by striking the

10 period at the end and inserting a semicolon;

11 and

12 (C) by adding at the end the following:

13 ‘‘(D) salaries and expenses of the Office of

14 Private Sector Partnership, but not to exceed

15 $5,000,000 for each fiscal year; and’’.

16 SEC. 204. ADEQUATE COVERAGE FOR AGRICULTURAL COM17 MODITIES.

18 Section 508(a) of the Federal Crop Insurance Act (7

19 U.S.C. 1508(a)) is amended by adding at the end the fol20 lowing:

21 ‘‘(7) ADEQUATE COVERAGE FOR AGRICULTURAL

22 COMMODITIES.—

23 ‘‘(A) REVIEW.—The Board shall review

24 the plans of insurance that are offered by ap25 proved insurance providers under this Act to
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1 determine if each agricultural commodity (in2 cluding each new or speciality crop) is ade3 quately served by the plans.

4 ‘‘(B) RECOMMENDATIONS.—If the Board

5 determines that an agricultural commodity (in6 cluding a new or specialty crop) is not ade7 quately served by the plans, the Board shall

8 recommend to the Office of Risk Management

9 that the Office—

10 ‘‘(i) develop or (through the Corpora11 tion) contract to develop plans of insurance

12 for the agricultural commodity; and

13 ‘‘(ii) provide the plans to approved in14 surance providers, to be offered for sale to

15 producers.’’.

16 SEC. 205. FEES FOR PLANS OF INSURANCE.

17 (a) IN GENERAL.—Section 508(h)(5) of the Federal

18 Crop Insurance Act (7 U.S.C. 1508(h)(5))) is amended—

19 (1) by striking ‘‘Any policy’’ and inserting the

20 following:

21 ‘‘(A) IN GENERAL.—Any policy’’; and

22 (2) by adding at the end the following:

23 ‘‘(B) FEES FOR EXISTING PLANS OF IN24 SURANCE.—
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1 ‘‘(i) IN GENERAL.—Effective begin2 ning with the 2000 reinsurance year, if an

3 approved insurance provider elects to sell a

4 plan of insurance that was developed by

5 another approved insurance provider and

6 the plan of insurance was approved by the

7 Board before January 1, 1999, the ap8 proved insurance provider that developed

9 the plan of insurance shall have the right

10 to receive a fee from the approved insur11 ance provider that elects to sell the plan of

12 insurance.

13 ‘‘(ii) AMOUNT.—The amount of the

14 fee that is payable by an approved insur15 ance provider for a plan of insurance

16 under clause (i) shall be—

17 ‘‘(I) for each of the first 5 crop

18 years that the plan is sold, $2.00 for

19 each policy under the plan that is sold

20 by the approved insurance provider;

21 ‘‘(II) for each of the next 3 crop

22 years that the plan is sold, $1.00 for

23 each policy under the plan that is sold

24 by the approved insurance provider;

25 and
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1 ‘‘(III) for each crop year there2 after that the plan is sold, 50 cents

3 for each policy under the plan that is

4 sold by the approved insurance pro5 vider.

6 ‘‘(C) FEES FOR NEW PLANS OF INSUR7 ANCE.—

8 ‘‘(i) IN GENERAL.—Effective begin9 ning with the 2000 reinsurance year, if an

10 approved insurance provider elects to sell a

11 plan of insurance that was developed by

12 another approved insurance provider, the

13 plan of insurance was approved by the

14 Board on or after January 1, 1999, and

15 the plan of insurance was not available at

16 the time the plan of insurance was ap17 proved by the Board, the approved insur18 ance provider that developed the plan of

19 insurance shall have the right to receive a

20 fee from the approved insurance provider

21 that elects to sell the plan of insurance.

22 ‘‘(ii) AMOUNT.—

23 ‘‘(I) IN GENERAL.—Subject to

24 subclause (II), the amount of the fee

25 that is payable by an approved insur-
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1 ance provider for a plan of insurance

2 under clause (i) shall be an amount

3 that is—

4 ‘‘(aa) determined by the ap5 proved insurance provider that

6 developed the plan; and

7 ‘‘(bb) approved by the

8 Board.

9 ‘‘(II) APPROVAL.—The Board

10 shall not approve the amount of a fee

11 under clause (i) if the amount of the

12 fee unnecessarily inhibits the use of

13 the plan of insurance, as determined

14 by the Board.

15 ‘‘(D) PAYMENTS.—The Corporation shall

16 annually—

17 ‘‘(i) collect from an approved insur18 ance provider the amount of any fees that

19 are payable by the approved insurance pro20 vider under subparagraphs (B) and (C);

21 and

22 ‘‘(ii) credit any fees that are payable

23 to an approved insurance provider under

24 subparagraphs (B) and (C).’’.
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1 (b) FUNDING.—Section 516 of the Federal Crop In2 surance Act (7 U.S.C. 1516) (as amended by section

3 203(b)(2)) is amended—

4 (1) in subsection (b)(1), by adding at the end

5 the following:

6 ‘‘(E) payment of fees in accordance with

7 section 508(h)(5)(C).’’; and

8 (2) in subsection (c)(1), by inserting ‘‘and fees’’

9 after ‘‘premium income’’.

10 SEC. 206. FLEXIBLE SUBSIDY PILOT PROGRAM.

11 Section 508(h) of the Federal Crop Insurance Act (7

12 U.S.C. 1508(h)) is amended by adding at the end the fol13 lowing:

14 ‘‘(11) FLEXIBLE SUBSIDY PILOT PROGRAM.—

15 For each of the 2000 through 2002 crop years, the

16 Corporation shall carry out a pilot program under

17 which flexible subsidies are provided under this title

18 to encourage private sector innovation through ex19 clusive marketing rights and premium rate competi20 tion.’’.

Æ