I

106TH CONGRESS

1ST SESSION H. R. 1536

To amend the Federal Crop Insurance Act to encourage the broadest possible

participation of producers in the Federal crop insurance program and

to ensure the continued availability of affordable crop insurance for

producers.

IN THE HOUSE OF REPRESENTATIVES

APRIL 22, 1999

Mr. POMEROY (for himself, Mr. THUNE, Mr. MINGE, and Mr. BOSWELL) introduced the following bill; which was referred to the Committee on Agriculture

A BILL

To amend the Federal Crop Insurance Act to encourage

the broadest possible participation of producers in the

Federal crop insurance program and to ensure the continued availability of affordable crop insurance for producers.

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 Improvement Act of 1999’’.

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.

Sec. 2. Establishment or approval of expected market price for each agricultural commodity for which insurance is offered.

Sec. 3. Fixing adequate premium amounts for additional coverage.

Sec. 4. Payment of portion of crop insurance premium by Corporation.

Sec. 5. Effect of disaster declaration on determination of producer’s actual production history.

Sec. 6. Assigned yields for newly acquired lands and new crops.

Sec. 7. Cost of production risk protection pilot project.

Sec. 8. Rating methodologies pilot project.

Sec. 9. Livestock coverage pilot project.

Sec. 10. Board of directors of Corporation.

1 SEC. 2. ESTABLISHMENT OR APPROVAL OF EXPECTED

2 MARKET PRICE FOR EACH AGRICULTURAL

3 COMMODITY FOR WHICH INSURANCE IS OF4 FERED.

5 Section 508(c) of the Federal Crop Insurance Act (7

6 U.S.C. 1508(c)) is amended by striking paragraph (5) and

7 inserting the following new paragraph:

8 ‘‘(5) EXPECTED MARKET PRICE.—

9 ‘‘(A) ESTABLISHMENT OR APPROVAL.—

10 For the purposes of this title, the Corporation

11 shall establish or approve the price level (re12 ferred to in this title as the ‘expected market

13 price’) of each agricultural commodity for which

14 insurance is offered.

15 ‘‘(B) AMOUNT GENERALLY.—Except as

16 provided in subparagraphs (C) and (D), the ex17 pected market price of an agricultural com18 modity shall be not less than the projected mar19 ket price of the agricultural commodity, as de20 termined by the Corporation, but the expected
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1 market price may be based on the actual mar2 ket price of the agricultural commodity at the

3 time of harvest, as determined by the Corpora4 tion.

5 ‘‘(C) REVENUE AND SIMILAR PLANS.—In

6 the case of revenue and other similar plans of

7 insurance, the expected market price of an agri8 cultural commodity shall be the actual market

9 price of the agricultural commodity, as deter10 mined by the Corporation.

11 ‘‘(D) COST OF PRODUCTION AND SIMILAR

12 PLANS.—In the case of cost of production or

13 similar plans of insurance, the expected market

14 price of an agricultural commodity shall be the

15 projected cost of producing the agricultural

16 commodity, as determined by the Corporation.’’.

17 SEC. 3. FIXING ADEQUATE PREMIUM AMOUNTS FOR ADDI18 TIONAL COVERAGE.

19 Section 508(d)(2) of the Federal Crop Insurance Act

20 (7 U.S.C. 1508(d)(2)) is amended—

21 (1) in subparagraph (B), by striking ‘‘under all

22 policies with that level of coverage’’ after ‘‘antici23 pated losses’’; and

24 (2) by striking subparagraph (C) and inserting

25 the following new subparagraphs:
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1 ‘‘(C) In the case of additional coverage at

2 greater than or equal to 65 percent of the re3 corded or appraised average yield indemnified

4 at 100 percent of the expected market price, or

5 an equivalent coverage, but less than 75 percent

6 of the recorded or appraised average yield in7 demnified at 100 percent of the expected mar8 ket price, or an equivalent coverage, the amount

9 of the premium shall—

10 ‘‘(i) be sufficient to cover anticipated

11 losses under all policies with that level of

12 coverage and a reasonable reserve; and

13 ‘‘(ii) include an amount for operating

14 and administrative expenses, as determined

15 by the Corporation, on an industry-wide

16 basis as a percentage of the amount of the

17 premium used to define loss ratio.

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

19 equal to or greater than 75 percent of the re20 corded or appraised average yield indemnified

21 at 100 percent of the expected market price, or

22 an equivalent coverage, the amount of the pre23 mium shall—
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1 ‘‘(i) be sufficient to cover anticipated

2 losses under all policies with that level of

3 coverage and a reasonable reserve; and

4 ‘‘(ii) include an amount for operating

5 and administrative expenses, as determined

6 by the Corporation, on an industry-wide

7 basis as a percentage of the amount of the

8 premium used to define loss ratio.’’.

9 SEC. 4. PAYMENT OF PORTION OF CROP INSURANCE PRE10 MIUM BY CORPORATION.

11 (a) PAYMENT REQUIRED.—Section 508(e) of the

12 Federal Crop Insurance Act (7 U.S.C. 1508(e)) is

13 amended—

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

15 following new paragraph:

16 ‘‘(1) IN GENERAL.—

17 ‘‘(A) MANDATORY PAYMENTS.—For the

18 purpose of encouraging the broadest possible

19 participation of producers in the crop insurance

20 plans of insurance authorized to be insured or

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

22 Corporation shall pay a part of the premium in

23 the amounts determined under this subsection.

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

25 case of a plan of insurance approved by the
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1 Corporation under subsection (h), the Corpora2 tion may pay a part of the premium in the

3 amounts not to exceed the amounts determined

4 under this subsection.’’; and

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

6 (B) and (C) and inserting the following new sub7 paragraphs:

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

9 than 65 percent of the recorded or appraised

10 average yield indemnified at 100 percent of the

11 expected market price, or an equivalent cov12 erage, the amount shall be equal to the sum

13 of—

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

15 premium established under subsection

16 (d)(2)(B) to satisfy the requirements of

17 clause (i) of such subsection; and

18 ‘‘(ii) the amount of operating and ad19 ministrative expenses included under sub20 section (d)(2)(B)(ii).

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

22 than or equal to 65 percent of the recorded or

23 appraised average yield indemnified at 100 per24 cent of the expected market price, or an equiva25 lent coverage, but less than 75 percent of the
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1 recorded or appraised average yield indemnified

2 at 100 percent of the expected market price, or

3 an equivalent coverage, the amount shall be

4 equal to the sum of—

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

6 premium established under subsection

7 (d)(2)(C) to satisfy the requirements of

8 clause (i) of such subsection; and

9 ‘‘(ii) the amount of operating and ad10 ministrative expenses included under sub11 section (d)(2)(C)(ii).

12 ‘‘(D) In the case of coverage equal to or

13 greater than 75 percent of the recorded or ap14 praised average yield indemnified at 100 per15 cent of the expected market price, or an equiva16 lent coverage, the amount shall be equal to the

17 sum of—

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

19 premium established under subsection

20 (d)(2)(D) to satisfy the requirements of

21 clause (i) of such subsection for coverage

22 at 75 percent of the recorded or appraised

23 average yield indemnified at 100 percent of

24 the expected market price; and
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1 ‘‘(ii) the amount of operating and ad2 ministrative expenses included under sub3 section (d)(2)(D)(ii).’’.

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

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

6 is amended by striking the second sentence.

7 SEC. 5. EFFECT OF DISASTER DECLARATION ON DETER8 MINATION OF PRODUCER’S ACTUAL PRODUC9 TION HISTORY.

10 (a) DEFINITION OF DESIGNATED DISASTER AREA.—

11 Section 502(b) of the Federal Crop Insurance Act (7

12 U.S.C. 1502(b)) is amended—

13 (1) by redesignating paragraphs (6), (7), and

14 (8) as paragraphs (7), (8), and (9), respectively; and

15 (2) by inserting after paragraph (5) the fol16 lowing new paragraph:

17 ‘‘(6) DESIGNATED DISASTER AREA.—The term

18 ‘designated disaster area’ means an area—

19 ‘‘(A) covered by a Presidential declaration

20 of major disaster issued under section 401 of

21 the Robert T. Stafford Disaster Relief and

22 Emergency Assistance Act (42 U.S.C. 5170); or

23 ‘‘(B) determined to be a disaster area by

24 the Secretary under subpart A of part 1945 of

25 title 7, Code of Federal Regulations.’’.
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1 (b) YIELD DETERMINATIONS.—Section 508(g) of

2 such Act (7 U.S.C. 1508(g)) is amended by striking para3 graph (3) and inserting the following new paragraph (3):

4 ‘‘(3) EXCLUSION OF ONE OR MORE CROP

5 YEARS.—In establishing the actual production his6 tory of a producer for a crop under paragraph

7 (2)(A) or using the producer’s actual production

8 records for any other purpose under this subsection,

9 the Corporation shall exclude any crop year of the

10 crop at the producer’s election if, at any time during

11 the crop year, the county in which the crop was

12 grown (or an adjacent county) was included in a

13 designated disaster area declared as a result of dam14 aging weather.’’.

15 SEC. 6. ASSIGNED YIELDS FOR NEWLY ACQUIRED LANDS

16 AND NEW CROPS.

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

18 Act (7 U.S.C. 1508(g)(2)(B)) is amended by adding at

19 the end the following new sentence: ‘‘However, if the lack

20 of satisfactory yield evidence is the result of the recent

21 acquisition of land by the producer, the conversion of

22 noncrop land to production, or the conversion of cropland

23 to a different crop, as determined by the Corporation, then

24 at the election of the producer, the Corporation shall as25 sign the producer a yield for that land that is equal to
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1 100 percent of the average transitional yield for the com2 modity involved in the county in which the land is lo3 cated.’’.

4 SEC. 7. COST OF PRODUCTION RISK PROTECTION PILOT

5 PROJECT.

6 Section 508(h)(6) of the Federal Crop Insurance Act

7 (7 U.S.C. 1508(h)(6)) is amended—

8 (1) in subparagraph (A), by striking ‘‘, to the

9 extent practicable,’’;

10 (2) in subparagraph (B)(i), by striking ‘‘1996

11 and 1997 crop years’’ and inserting ‘‘2000 through

12 2004 crop years’’; and

13 (3) by striking subparagraph (C) and inserting

14 the following new subparagraph:

15 ‘‘(C) COVERAGE LEVEL; DETERMINATION

16 OF COST OF PRODUCTION.—A producer electing

17 to participate in the pilot project may select a

18 coverage level not to exceed 90 percent of the

19 applicable cost of production determined by the

20 Office of Risk Management for the county or

21 an area of the county in which the producer’s

22 farm is located. The cost of production coverage

23 determined by the Office shall be based on cost

24 of production data prepared and published by
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1 the land-grant college or university for the

2 State in which the producer’s farm is located.’’.

3 SEC. 8. RATING METHODOLOGIES PILOT PROJECT.

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

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

6 striking paragraph (8) and inserting the following new

7 paragraph:

8 ‘‘(8) RATING METHODOLOGIES PILOT

9 PROJECT.—Not later than September 30, 2000, the

10 Office of Risk Management shall—

11 ‘‘(A) review the methodologies that are

12 used to rate plans of insurance under this title;

13 and

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

15 the private sector to develop new methodologies

16 for rating plans of insurance under this title

17 that take into account the lower risk pool of—

18 ‘‘(i) producers that elect not to par19 ticipate in the Federal crop insurance pro20 gram established under this title; and

21 ‘‘(ii) producers that elect only to ob22 tain catastrophic risk protection under

23 subsection (b).’’.

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

25 the Federal Crop Insurance Act (7 U.S.C. 1507(c)) is
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1 amended in the last sentence by striking ‘‘Nothing’’ and

2 inserting ‘‘Except as provided in section 508(h)(8), noth3 ing’’.

4 SEC. 9. LIVESTOCK COVERAGE PILOT PROJECT.

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

6 U.S.C. 1508(h)) is amended by adding at the end the fol7 lowing new paragraph:

8 ‘‘(11) LIVESTOCK COVERAGE PILOT PROJECT.—

9 Notwithstanding section 518, the Corporation shall

10 carry out a pilot project in a limited number of

11 counties, to be selected by the Corporation, under

12 which a producer of livestock may elect to receive

13 federally reinsured coverage under this title.’’.

14 SEC. 10. BOARD OF DIRECTORS OF CORPORATION.

15 Section 505 of the Federal Crop Insurance Act (7

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

17 inserting the following new subsection:

18 ‘‘(a) BOARD OF DIRECTORS.—

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

20 Corporation shall be vested in a Board subject to the

21 general supervision of the Secretary.

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

23 of—

24 ‘‘(A) 2 members who are active agricul25 tural producers with or without crop insurance;
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1 ‘‘(B) 1 member who is active in the crop

2 insurance business;

3 ‘‘(C) 1 member who is active in the rein4 surance business;

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

6 Foreign Agricultural Services;

7 ‘‘(E) the Under Secretary for Rural Devel8 opment; and

9 ‘‘(F) the Chief Economist of the Depart10 ment of Agriculture.

11 ‘‘(3) APPOINTMENT AND TERMS OF PRIVATE

12 SECTOR MEMBERS.—The members of the Board de13 scribed in subparagraphs (A), (B), and (C) of para14 graph (2)—

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

16 at the pleasure of, the Secretary;

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

18 the Federal Government;

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

20 terms, as determined by the Secretary; and

21 ‘‘(D) shall serve not more than 2 consecu22 tive terms.

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

24 member of the Board described in subparagraph
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1 (A), (B), or (C) of paragraph (2) to serve as Chair2 person of the Board.’’.

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