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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1666 Introduced in Senate (IS)]

106th CONGRESS
  1st Session
                                S. 1666

To provide risk reduction assistance to agricultural producers, and for 
                            other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 29, 1999

 Mr. Lugar (for himself, Mr. McConnell, Mr. Fitzgerald, and Mr. Helms) 
introduced the following bill; which was read twice and referred to the 
           Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL

 
To provide risk reduction assistance to agricultural producers, and for 
                            other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Farmers' Risk 
Management Act of 1999''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                   TITLE I--RISK MANAGEMENT PAYMENTS

Sec. 101. Definitions.
Sec. 102. Risk management contract.
Sec. 103. Administrative provisions.
Sec. 104. Repeal; funding.
Sec. 105. Crops.
                        TITLE II--CROP INSURANCE

Sec. 201. Sanctions for program compliance and fraud.
Sec. 202. Oversight of loss adjustment.
Sec. 203. Revenue insurance pilot program.
Sec. 204. Reinsurance agreements.
Sec. 205. Reduction in underwriting gains and losses from catastrophic 
                            risk protection.
Sec. 206. Whole farm revenue insurance pilot program.
Sec. 207. Product innovation and rate competition pilot program.
Sec. 208. Limitation on double insurance.
                         TITLE III--REGULATIONS

Sec. 301. Regulations.

                   TITLE I--RISK MANAGEMENT PAYMENTS

SEC. 101. DEFINITIONS.

    In this title:
            (1) Actual production history.--The term ``actual 
        production history'' means a determination by the Corporation 
        that establishes the average production (yield and acreage) for 
        the 2000 crop of an agricultural commodity on the farm in 
        accordance with section 508(g)(2) of the Federal Crop Insurance 
        Act (7 U.S.C. 1508(g)(2)).
            (2) Agricultural commodity.--The term ``agricultural 
        commodity'' means each agricultural commodity specified in 
        section 518 of the Federal Crop Insurance Act (7 U.S.C. 1518), 
        excluding livestock, that is insurable, as determined by the 
        Corporation.
            (3) Applicable crop.--The term ``applicable crop'' means 
        each of the 2001 through 2004 crops of an agricultural 
        commodity produced by a producer.
            (4) Applicable year.--The term ``applicable year'' means 
        the year in which--
                    (A) the applicable crop is produced on the farm of 
                a producer; and
                    (B) the producer elects to receive a risk 
                management payment under a risk management contract.
            (5) Assigned yield.--The term ``assigned yield'' means a 
        yield assigned by the Corporation to determine the production 
        of a producer (including a new producer and a producer that has 
        not previously purchased crop insurance for an agricultural 
        commodity) that--
                    (A) is determined by the Corporation in accordance 
                with section 508(g)(2) of the Federal Crop Insurance 
                Act (7 U.S.C. 1508(g)(2)); and
                    (B) is assigned to a producer if the producer 
                cannot establish an actual production history.
            (6) Corporation.--The term ``Corporation'' means the 
        Federal Crop Insurance Corporation.
            (7) Price level.--The term ``price level'' means the price 
        level for an agricultural commodity on a yield and loss basis 
        that is the average price level established by the Corporation 
        in accordance with section 508(c)(5) of the Federal Crop 
        Insurance Act (7 U.S.C. 1508(c)(5)) for each of the 1997 
        through 1999 crops of the agricultural commodity, as determined 
        by the Corporation.
            (8) Principal agricultural commodity.--The term ``principal 
        agricultural commodity'' means any commodity (including 
        livestock and a commodity that is not insurable under the 
        Federal Crop Insurance Act (7 U.S.C. 1501 et seq.)) produced on 
        the farm of a producer that comprises a significant percentage 
        of the value of all commodities produced on the farm, as 
        determined by the Secretary.
            (9) Producer.--The term ``producer'' means a person that is 
        at risk in the production of an agricultural commodity for 
        which a risk management payment under a risk management 
        contract is sought for an applicable year.
            (10) Regulated exchange.--The term ``regulated exchange'' 
        means a board of trade (as defined in section 1a of the 
        Commodity Exchange Act (7 U.S.C. 1a)) that is designated as a 
        contract market under section 2(a)(1)(B) of that Act (7 U.S.C. 
        2a).
            (11) Risk management contract.--The term ``risk management 
        contract'' means a contract entered into under section 102 for 
        an applicable crop of an agricultural commodity of a producer.
            (12) Secretary.--The term ``Secretary'' means the Secretary 
        of Agriculture.

SEC. 102. RISK MANAGEMENT CONTRACT.

    (a) Offer and Consideration.--
            (1) Offer.--The Secretary shall offer to enter into a risk 
        management contract for the 2001 through 2004 crops with each 
        producer that is eligible to obtain a plan of insurance under 
        the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) for an 
        agricultural commodity of a producer.
            (2) Terms.--
                    (A) Risk management payment.--Under a risk 
                management contract, for each agricultural commodity 
                produced by a producer for an applicable crop, the 
                Secretary shall pay the producer a risk management 
                payment.
                    (B) Basis for payment.--The amount of a risk 
                management payment shall be based on the actual 
production history of each agricultural commodity, as determined by the 
Corporation under subsection (c)(2).
                    (C) Election of producer.--A producer may, for the 
                applicable year--
                            (i) obtain a risk management payment; or
                            (ii) have an equal amount credited by the 
                        Corporation to the premium owed by the producer 
                        for 1 or more plans of Federal crop insurance 
                        purchased for the applicable year.
                    (D) Qualifying risk management practices.--In 
                exchange for the benefit offered under subparagraph 
                (A), a producer shall use at least 2 qualifying risk 
                management practices on the farm as provided in 
                subsection (b).
    (b) Qualifying Risk Management Practices.--To be eligible for a 
risk management payment under a risk management contract for an 
applicable crop, a producer shall obtain or use for the applicable crop 
at least 2 of the following qualifying risk management practices:
            (1) Crop insurance.--A producer may obtain Federal crop 
        insurance under the Federal Crop Insurance Act (7 U.S.C. 1501 
        et seq.) or private crop insurance (such as hail coverage) for 
        a principal agricultural commodity produced on the farm of the 
        producer for the applicable crop, at a level of coverage that 
        is at least equivalent to catastrophic risk protection.
            (2) Future or option.--A producer may enter into a future 
        or option for a principal agricultural commodity produced on 
        the farm of the producer for the applicable crop on a regulated 
        exchange that is (as determined by the Secretary)--
                    (A)(i) in the case of a future, at least 1 
                regulated futures contract (as defined in section 
                1256(g) of the Internal Revenue Code of 1986); and
                    (ii) in the case of an option, at least 1 listed 
                option (as defined in section 1256(g) of that Code); 
                and
                    (B) a hedging transaction (as defined in section 
                1256(e)(2) of that Code) involving a principal 
                agricultural commodity that is used to reduce 
                production, price, or revenue risk.
            (3) Agricultural trade option.--A producer may purchase, on 
        other than a regulated exchange, an agricultural trade option 
        for the applicable crop of a principal agricultural commodity 
        produced on the farm of the producer that (as determined by the 
        Secretary)--
                    (A) provides coverage for at least 10 percent of 
                the estimated monetary value of the principal 
                agricultural commodity;
                    (B) is an equity option (as defined in section 
                1256(g) of the Internal Revenue Code of 1986); and
                    (C) is a hedging transaction (as defined in section 
                1256(e)(2) of that Code) involving a principal 
                agricultural commodity that is used to reduce 
                production, price, or revenue risk.
            (4) Cash forward or other marketing contract.--A producer 
        may enter into a cash forward or other type of marketing 
        contract for at least 20 percent of the monetary value of a 
        principal agricultural commodity produced on the farm of the 
        producer for the applicable crop, as determined by the 
        Secretary.
            (5) Trust.--A producer may make a deposit of an amount 
        equal to at least 25 percent of the risk management payment of 
        the producer for the applicable year into a trust authorized by 
        statute for eligible farming businesses that may be established 
        to accept tax deductible contributions.
            (6) Agricultural marketing and risk management education.--
        A producer may attend and complete in the applicable year an 
        agricultural marketing or risk management class or seminar 
        approved by the Secretary, including a class or seminar 
        conducted by a broker who is licensed by a regulated exchange.
            (7) Financial risk reduction.--
                    (A) In general.--A producer may use at least 50 
                percent of the risk management payment of the producer 
                for the applicable year to achieve, as determined by 
                the Secretary--
                            (i) a reduction of farm financial debt in a 
                        manner that reduces farm business leverage; or
                            (ii) an increase of farm business 
                        liquidity.
                    (B) Notice and comment.--The application of the 
                notice and comment provisions of section 553 of title 
                5, United States Code, to this paragraph shall not 
                delay the implementation of the other paragraphs of 
                this subsection by the Secretary.
            (8) Diversification.--
                    (A) In general.--A producer may diversify 
                production on the farm of the producer by producing at 
                least 1 additional commodity on the farm or by 
                significantly increasing farm enterprise 
                diversification in the applicable year, as determined 
                by the Secretary.
                    (B) Notice and comment.--The application of the 
                notice and comment provisions of section 553 of title 
                5, United States Code, to this paragraph shall not 
                delay the implementation of the other paragraphs of 
                this subsection by the Secretary.
    (c) Determination of Risk Management Payment.--
            (1) Amount available for each applicable year.--The 
        Secretary shall, to the maximum extent practicable, expend 
        $1,275,000,000 for each of the 2001 through 2004 crops to 
        satisfy the obligations of the Secretary under all risk 
        management contracts.
            (2) Calculation.--A risk management payment for an 
        agricultural commodity produced on the farm of a producer for 
        an applicable crop shall be equal to the product obtained by 
        multiplying--
                    (A)(i) the actual production history of the 
                producer; or
                    (ii) if an actual production history is not 
                available, an assigned yield;
                    (B) the price level for the agricultural commodity; 
                and
                    (C) subject to paragraph (1), a payment rate 
                determined by the Secretary.

SEC. 103. ADMINISTRATIVE PROVISIONS.

    (a) Certification.--
            (1) In general.--Not later than April 15 of the year 
        following an applicable year, a producer shall submit to the 
        Secretary a risk management practices form that describes the 
        qualifying risk management practices that were obtained or used 
        by the producer during the applicable year.
            (2) Timing.--The Secretary may not require a producer to 
        submit the information described in paragraph (1) prior to 
        April 15 of the year following the applicable year.
            (3) Certification over the internet.--The Secretary shall, 
        to the maximum extent practicable, facilitate the certification 
        process required under this paragraph by using the Internet.
    (b) Compliance.--The Secretary may perform random audits of 
producers that obtain a risk management payment to ensure that the 
producers obtained or used the qualifying risk management practices 
described in the form.
    (c) Timing of Benefits.--
            (1) Risk management payment.--
                    (A) In general.--For each applicable crop, at the 
                option of a producer that enters into a risk management 
                contract, the Secretary shall pay the producer the full 
                amount (or such portion as the producer may specify) of 
                the risk management payment required to be paid for the 
                applicable year at such time or times during that year 
                as the producer may specify.
                    (B) Limitation.--The payment of a risk management 
                payment (or portion of a risk management payment) under 
                this paragraph shall not occur prior to--
                            (i) for the 2001 crop, October 1, 2000;
                            (ii) for the 2002 crop, October 1, 2001;
                            (iii) for the 2003 crop, October 1, 2002; 
                        and
                            (iv) for the 2004 crop, October 1, 2003.
            (2) Credit to premium owed.--For each applicable crop, a 
        producer that elects to have an amount equal to the risk 
        management payment of the producer credited by the Corporation 
        to the premium owed for a plan of Federal crop insurance for an 
        applicable crop shall receive the benefit at the time the 
        premium is paid by the producer.
    (d) Violation of Risk Management Contract.--If a producer has 
accepted a risk management payment for an applicable year and the 
producer fails to comply with subsection (a)(1) or section 102(b) with 
respect to the applicable year, the producer shall refund to the 
Secretary an amount equal to the risk management payment.
    (e) Assignment and Sharing of Benefits.--
            (1) Assignment of benefits.--Assignment of a benefit 
        provided under this title shall be subject to section 8(g) of 
        the Soil Conservation and Domestic Allotment Act (16 U.S.C. 
        590h(g)).
            (2) Notice.--The producer making the assignment, or the 
        assignee, shall provide the Secretary with notice, in such 
        manner as the Secretary may require in a risk management 
        contract, of any assignment.
            (3) Sharing of benefits.--The Secretary shall provide for 
        the sharing of benefits under this title among all producers 
        that are at risk in the production of an applicable crop on a 
        fair and equitable basis.
    (f) Use of Commodity Credit Corporation.--The Secretary shall carry 
out this title using the funds, facilities, and authorities of the 
Commodity Credit Corporation.

SEC. 104. REPEAL; FUNDING.

    (a) Repeal.--This title (other than this section) is repealed 
effective September 30, 2004.
    (b) Funding.--Effective beginning September 30, 2004, the Secretary 
may not use the funds of the Commodity Credit Corporation, the Federal 
Crop Insurance Corporation, or funds under any provision of law to 
provide risk management payments under this title or any other 
provision of law.
    (c) Effect on Risk Management Payments or Reductions in Premium.--
This section shall not affect any requirements imposed on the Secretary 
or a producer under this title (as in effect before September 30, 
2004).

SEC. 105. CROPS.

    This title shall apply to each applicable crop.

                        TITLE II--CROP INSURANCE

SEC. 201. SANCTIONS FOR PROGRAM COMPLIANCE AND FRAUD.

    (a) In General.--Section 506 of the Federal Crop Insurance Act (7 
U.S.C. 1506) is amended by striking subsection (n) and inserting the 
following:
    ``(n) Sanctions.--
            ``(1) False information.--A producer, agent, loss adjuster, 
        approved insurance provider, or other person that willfully and 
        intentionally provides any false or inaccurate information to 
        the Corporation or to an approved insurance provider with 
        respect to a policy or plan of insurance under this title may, 
        after notice and an opportunity for a hearing on the record, be 
        subject to 1 or more of the sanctions described in paragraph 
        (3).
            ``(2) Compliance.--An agent, loss adjuster, approved 
        insurance provider, or other person that is determined by the 
        Corporation to have willfully and intentionally failed to 
        comply with a requirement of the Corporation or the Standard 
        Reinsurance Agreement may, after notice and an opportunity for 
        a hearing on the record, be subject to 1 or more of the 
        sanctions described in paragraph (3).
            ``(3) Authorized sanctions.--If the Secretary determines 
        that a person covered by this subsection has committed a 
        material violation under paragraph (1) or (2), the following 
        sanctions may be imposed:
                    ``(A) Civil fines.--A civil fine may be imposed for 
                each violation in an amount not to exceed the greater 
                of--
                            ``(i) the amount of the pecuniary gain 
                        obtained as a result of the false or inaccurate 
                        information provided; or
                            ``(ii) $10,000.
                    ``(B) Producers.--In the case of a violation 
                committed by a producer, the producer may be 
                disqualified for a period of up to 5 years from--
                            ``(i) receiving any monetary or nonmonetary 
                        benefit provided--
                                    ``(I) under this title;
                                    ``(II) the Agricultural Market 
                                Transition Act (7 U.S.C. 7201 et seq.), 
                                including the noninsured crop disaster 
                                assistance program under section 196 of 
                                that Act (7 U.S.C. 7333);
                                    ``(III) the Agricultural Act of 
                                1949 (7 U.S.C. 1421 et seq.);
                                    ``(IV) the Commodity Credit 
                                Corporation Charter Act (15 U.S.C. 714 
                                et seq.);
                                    ``(V) the Agricultural Adjustment 
                                Act of 1938 (7 U.S.C. 1281 et seq.);
                                    ``(VI) title XII of the Food 
                                Security Act of 1985 (16 U.S.C. 3801 et 
                                seq.); or
                                    ``(VII) the Consolidated Farm and 
                                Rural Development Act (7 U.S.C. 1921 et 
                                seq.); and
                            ``(ii) receiving any monetary or 
                        nonmonetary benefit provided under any law to 
                        assist a producer of an agricultural commodity 
                        affected by a crop loss or a decline in the 
                        prices of agricultural commodities.
                    ``(C) Other persons.--In the case of a violation 
                committed by an agent, loss adjuster, approved 
                insurance provider, or other person (other than a 
                producer), the violator may be disqualified for a 
                period of up to 5 years from participating in any 
                program, or receiving any benefit, under this title.
            ``(4) Assessment of sanction.--The Secretary shall consider 
        the gravity of the violation of the person covered by this 
        subsection in determining--
                    ``(A) whether to impose a sanction under this 
                subsection; and
                    ``(B) the amount of the sanction to be imposed.
            ``(5) Disclosure of sanctions.--Each policy or plan of 
        insurance under this title shall prominently indicate the 
        sanctions prescribed under paragraph (3) for willfully and 
        intentionally--
                    ``(A) providing false or inaccurate information to 
                the Corporation or to an approved insurance provider; 
                or
                    ``(B) failing to comply with a requirement of the 
                Corporation or the Standard Reinsurance Agreement.
            ``(6) Insurance fund.--Any funds collected under this 
        subsection shall be deposited into the insurance fund 
        established under section 516(c).''.
    (b) Conforming Amendments.--Section 516(c) of the Federal Crop 
Insurance Act (7 U.S.C. 1516(c)) is amended by striking paragraph (1) 
and inserting the following:
            ``(1) In general.--There is established the Insurance Fund, 
        which shall include (to remain available without fiscal year 
        limitation)--
                    ``(A) premium income;
                    ``(B) amounts made available under subsection 
                (a)(2); and
                    ``(C) civil fines collected under section 
                508(k)(3)(B)(i)(II).''.

SEC. 202. OVERSIGHT OF LOSS ADJUSTMENT.

    Section 506(q) of the Federal Crop Insurance Act (7 U.S.C. 1506(q)) 
is amended by adding at the end the following:
            ``(3) Oversight of loss adjustment.--The Corporation 
        shall--
                    ``(A) develop procedures for an annual review by an 
                approved insurance provider of the performance of each 
                loss adjuster used by the approved insurance provider;
                    ``(B) oversee the annual review conducted by each 
                approved insurance provider; and
                    ``(C) consult with each approved insurance provider 
                regarding any remedial action that is determined 
necessary as a result of the annual review of a loss adjuster.
            ``(4) Compliance reports.--Not later than the end of each 
        fiscal year, the Corporation shall submit, to the Committee on 
        Agriculture of the House of Representatives, the Committee on 
        Agriculture, Nutrition, and Forestry of the Senate, and the 
        Board, a report concerning compliance by approved insurance 
        providers and loss adjusters with this title, including any 
        recommendations for legislative or administrative changes that 
        could further improve compliance.''.

SEC. 203. REVENUE INSURANCE PILOT PROGRAM.

    Section 508(h)(9)(A) of the Federal Crop Insurance Act (7 U.S.C. 
1508(h)(9)(A)) is amended by striking ``crop years 1997, 1998, 1999, 
and 2000,'' and inserting ``the 1999 through 2004 crops,''.

SEC. 204. REDUCTION IN UNDERWRITING GAINS AND LOSSES FROM CATASTROPHIC 
              RISK PROTECTION.

    Section 508(k) of the Federal Crop Insurance Act (7 U.S.C. 1508(k)) 
is amended by adding at the end the following:
            ``(8) Reduction in underwriting gains and losses from 
        catastrophic risk protection.--Effective for each of the 2001 
        through 2004 reinsurance years, notwithstanding any other 
        provision of law, the reinsurance agreements of the Corporation 
        shall require that 50 percent of any premiums or losses for 
        catastrophic risk protection policies under subsection (b) be 
        included in the calculation of gains or losses of an approved 
        insurance provider.''.

SEC. 205. WHOLE FARM REVENUE INSURANCE PILOT PROGRAM.

    Section 508(m) of the Federal Crop Insurance Act (7 U.S.C. 1508(m)) 
is amended by adding at the end the following:
            ``(4) Whole farm revenue insurance pilot program.--
                    ``(A) Definition of agricultural enterprises.--In 
                this paragraph, the term `agricultural enterprises' 
                means the production and marketing of agricultural 
                commodities and livestock on a farm.
                    ``(B) Purpose.--The purpose of this paragraph is to 
                authorize the Corporation to conduct a pilot program 
                to--
                            ``(i) determine whether whole farm revenue 
                        insurance is a good risk management tool for 
                        agricultural enterprises on a farm; and
                            ``(ii) accumulate actuarial and rating data 
                        necessary to establish permanent whole farm 
                        revenue insurance coverage.
                    ``(C) Authority.--The Corporation shall conduct a 
                pilot program under which a producer of agricultural 
                commodities or livestock may obtain insurance that 
                guarantees a level of revenue for agricultural 
                enterprises on the farm of the producer.
                    ``(D) Revenue guarantee.--The amount of the revenue 
                guarantee for agricultural enterprises on the farm of a 
                producer for a taxable year shall be equal to the 
                product obtained by multiplying--
                            ``(i) the coverage level; by
                            ``(ii) the lesser of--
                                    ``(I) the average adjusted gross 
                                income for the previous 5 taxable 
                                years, determined by taking into 
                                account only items of income, gain, 
                                deduction, or loss allocable to 
                                agricultural enterprises on the farm, 
                                as determined by the Corporation; or
                                    ``(II) the estimated revenue of the 
                                producer that will be earned from 
                                agricultural enterprises on the farm of 
                                the producer for the applicable year, 
                                as determined by the Corporation.
                    ``(E) Coverage levels.--A participating producer 
                may elect a coverage level under this paragraph that is 
                65, 75, or 80 percent of the average adjusted gross 
                income of the producer, as determined under 
                subparagraph (D)(i).
                    ``(F) Coverage; limitations.--
                            ``(i) In general.--Only revenue earned from 
                        agricultural enterprises on the farm of a 
                        producer shall be guaranteed under this 
                        paragraph at the coverage level selected by the 
                        producer.
                            ``(ii) All agricultural commodities and 
                        livestock.--Revenue from all agricultural 
                        enterprises involving agricultural commodities 
                        and livestock produced on the farm of a 
                        producer, including agricultural commodities 
                        and livestock that were not insurable on the 
                        date of enactment of this paragraph, shall be 
                        guaranteed under this paragraph.
                            ``(iii) Premium limitation.--
                                    ``(I) Definition of premium.--In 
                                this clause, the term `premium' means 
                                the aggregate premium paid by all 
                                insured persons covered by the pilot 
                                program authorized under this paragraph 
                                for a reinsurance year, excluding the 
                                part of the premium paid by the 
                                Corporation.
                                    ``(II) Limitation.--The total 
                                amount of premiums shall not exceed--
                                            ``(aa) $10,000,000 for the 
                                        2001 reinsurance year;
                                            ``(bb) $15,000,000 for the 
                                        2002 reinsurance year;
                                            ``(cc) $25,000,000 for the 
                                        2003 reinsurance year; and
                                            ``(dd) $40,000,000 for the 
                                        2004 reinsurance year.
                            ``(iv) Area limitation.--
                                    ``(I) In general.--The Corporation 
                                shall the limit the number of counties 
                                in which producers are eligible to 
                                participate in the pilot program 
                                authorized under this paragraph.
                                    ``(II) Standards.--In carrying out 
                                subclause (I), the Corporation shall 
                                ensure that--
                                            ``(aa) all regions of the 
                                        United States are covered; and
                                            ``(bb) sufficient actuarial 
                                        data can be obtained.
                    ``(G) Administration.--In providing a policy of 
                whole farm revenue insurance to an insured producer 
                under this paragraph, the Corporation shall--
                            ``(i) offer the policy through reinsurance 
                        agreements with private insurance companies;
                            ``(ii) ensure that the policy is 
                        actuarially sound;
                            ``(iii) require the insured producer to pay 
                        premiums and administrative fees for the policy 
                        in accordance with this section; and
                            ``(iv) pay a portion of the premium for the 
                        policy in an amount that does not exceed the 
                        amount authorized under subsection (e), except 
                        that the portion of premium paid for livestock 
                        shall be determined by the Corporation.
                    ``(H) Reinsurance years.--This paragraph shall 
                apply to each of the 2001 through 2004 reinsurance 
                years.''.

SEC. 206. PRODUCT INNOVATION AND RATE COMPETITION PILOT PROGRAM.

    Section 508(m) of the Federal Crop Insurance Act (7 U.S.C. 1508(m)) 
(as amended by section 205) is amended by adding at the end the 
following:
            ``(5) Product innovation and rate competition pilot 
        program.--
                    ``(A) Purpose.--The purpose of the pilot program 
                established under this paragraph is to determine what 
                incentives are necessary to encourage approved 
                insurance providers to--
                            ``(i) develop and offer innovative risk 
                        management products to producers; and
                            ``(ii) competitively rate premiums for the 
                        risk management products.
                    ``(B) Definitions.--In this paragraph:
                            ``(i) Initiating approved insurance 
                        provider.--The term `initiating approved 
                        insurance provider' means an insurance provider 
                        that has--
                                    ``(I) been approved by the 
                                Corporation to deliver plans of 
                                insurance under this title; and
                                    ``(II) researched and developed a 
                                pilot product that has been proposed 
                                to, and approved by, the Board.
                            ``(ii) Pilot product.--The term `pilot 
                        product' means a risk management product that 
                        has been researched and developed by an 
                        approved insurance provider and approved by the 
                        Board for--
                                    ``(I) loss of yield or revenue 
                                insurance coverage for 1 or more 
                                commodities (including commodities that 
                                are not insurable under this title as 
                                of the date of enactment of this 
                                paragraph, but excluding livestock);
                                    ``(II) rates of premium for the 
                                risk management product; and
                                    ``(III) associated underwriting 
                                systems for the risk management 
                                product.
                    ``(C) Approved insurance providers.--
                            ``(i) In general.--Subject to clause (ii), 
                        the Corporation shall establish a pilot program 
                        under which only an insurance provider that has 
                        been approved by the Corporation to deliver 
                        plans of insurance under this title and the 
                        Standard Reinsurance Agreement may propose to 
                        the Board--
                                    ``(I) a pilot product;
                                    ``(II) rates of premium for the 
                                pilot product; and
                                    ``(III) associated underwriting 
                                systems for the pilot product.
                            ``(ii) Lack of participation by 
                        providers.--
                                    ``(I) In general.--If (for any 
                                reinsurance year beginning 1 year or 
                                more after the date on which the 
                                Secretary promulgates rules to carry 
                                out this paragraph) at least 3 approved 
                                insurance providers have not obtained 
                                approval for a pilot product, the 
                                Corporation may approve any insurance 
                                provider that desires to participate 
in the pilot program established under this paragraph that--
                                            ``(aa) is licensed by an 
                                        appropriate State insurance 
                                        authority; and
                                            ``(bb) satisfies the 
                                        financial standards required of 
                                        an approved insurance provider.
                                    ``(II) Considered approved.--An 
                                insurance provider that the Corporation 
                                approves under subclause (I) shall be 
                                considered to be an approved insurance 
                                provider for the purposes of this 
                                paragraph.
                            ``(iii) Marketing in pilot area.--An 
                        approved insurance provider marketing a pilot 
                        product under this paragraph shall not be 
                        required to market the pilot product in every 
                        county of a pilot area determined under 
                        subparagraph (D).
                    ``(D) Pilot area.--
                            ``(i) Determination by initiating approved 
                        insurance provider.--Subject to clauses (ii) 
                        and (iii), an initiating approved insurance 
                        provider marketing a pilot product shall 
                        determine the size and location of a pilot 
                        area.
                            ``(ii) Limitation.--Subject to clause 
                        (iii), the size of the area in which the pilot 
                        program established under this paragraph is 
                        conducted shall not exceed--
                                    ``(I) in the case of the initial 
                                year of the pilot program, 10 counties 
                                in each of 3 States; and
                                    ``(II) in the case of each 
                                subsequent year of the pilot program, 
                                20 counties in each of 6 States.
                            ``(iii) Adjustments.--The Board may 
                        increase the size of the pilot area to the 
                        extent that the Board determines that a larger 
                        pilot area is necessary to validate the results 
                        of the pilot program.
                    ``(E) Relationship to title.--
                            ``(i) In general.--Each requirement of this 
                        title shall apply to a pilot product under this 
                        paragraph only to the extent that the 
                        requirement does not conflict with the 
                        requirements and purposes of this paragraph, as 
                        determined by the Corporation.
                            ``(ii) Inapplicable requirements.--
                        Requirements of this title that shall not apply 
                        to a pilot product include the requirements--
                                    ``(I) concerning actuarial 
                                soundness;
                                    ``(II) concerning levels of 
                                coverage;
                                    ``(III) concerning rates of 
                                premium;
                                    ``(IV) that the price level for 
                                coverage for each insured commodity 
                                must equal the expected market price 
                                for the commodity as established by the 
                                Board; and
                                    ``(V) that an approved insurance 
                                provider shall provide coverage of the 
                                pilot product throughout a State for 
                                all commodities if the approved 
                                insurance provider elects to provide 
                                any coverage in the State.
                    ``(F) Review by the board.--A proposal that applies 
                to the type of insurance coverage, rates of premium for 
                the pilot product, or associated underwriting systems 
                for the pilot product that are submitted to the Board 
                shall be reviewed by the Board.
                    ``(G) Submissions by providers.--In accordance with 
                standards established under subparagraph (I), an 
                initiating approved insurance provider shall include in 
                a proposal to the Board for a pilot product information 
                on all issues described in subclauses (I) through (VII) 
                of subparagraph (H)(i).
                    ``(H) Standards.--
                            ``(i) In general.--The Board shall approve 
                        a proposed pilot product for subsidy and 
                        reinsurance as provided in this paragraph if 
                        the Board finds that the proposal of the 
                        initiating approved insurance provider has 
                        adequately ensured that--
                                    ``(I) the interests of producers of 
                                commodities are adequately protected by 
                                the pilot product;
                                    ``(II) premiums charged to 
                                producers are actuarially appropriate;
                                    ``(III) the associated underwriting 
                                system of the proposed pilot product is 
                                appropriate and adequate;
                                    ``(IV) the proposed pilot product 
                                is reinsured under this title or 
                                through private reinsurance or is self-
                                insured;
                                    ``(V) the size and 1 or more 
                                locations of the pilot area are 
                                adequate;
                                    ``(VI) plans for quality assurance, 
                                auditing, and regulatory compliance are 
                                consistent with standard regulatory 
                                procedures of State departments of 
                                insurance and financial auditing 
                                procedures of publicly traded 
                                companies; and
                                    ``(VII) insurance protection 
                                against the risk covered by the 
                                proposed pilot product is not generally 
                                available from private plans of 
                                insurance that are not covered by this 
                                title.
                            ``(ii) Rates of premium.--A proposed rate 
                        of premium (including the part of premium paid 
                        by the Corporation) shall be considered 
                        adequate if the rate is sufficient to cover 
                        projected losses and expenses of the approved 
                        insurance provider, taking into consideration 
                        expected loss payments, expenses, capital 
allocations, and other expense factors normally taken into account in 
insurance rating.
                            ``(iii) Proposed underwriting plans.--A 
                        proposed underwriting plan for a pilot product 
                        may be on a class or individual farm basis, and 
                        shall at a minimum specify factors such as 
                        yield history for the farm or region, soils and 
                        resource quality for the farm, and farm 
                        production practices.
                            ``(iv) Reinsurance.--
                                    ``(I) Federal reinsurance.--Subject 
                                to subclause (III) and notwithstanding 
                                any other provision of this title, the 
                                Corporation shall, to the maximum 
                                extent practicable, make reinsurance 
                                available to an approved insurance 
                                provider under this paragraph.
                                    ``(II) Private or federal 
                                reinsurance.--An approved insurance 
                                provider may--
                                            ``(aa) apply private 
                                        reinsurance to the pilot 
                                        product of the approved 
                                        insurance provider;
                                            ``(bb) obtain reinsurance 
                                        for the pilot product under 
                                        this title; or
                                            ``(cc) self-insure the 
                                        pilot product.
                                    ``(III) Assignment to commercial 
                                fund.--A contract for pilot products 
                                that receives reinsurance under this 
                                title shall be assigned to the 
                                commercial fund for proportional 
                                reinsurance as provided in the Standard 
                                Reinsurance Agreement.
                                    ``(IV) Actuarially appropriate.--
                                The Board shall prescribe standards for 
                                rating premiums that are actuarially 
                                appropriate considering the risk 
                                inherent in a pilot product.
                    ``(I) Standards for submission and review.--
                            ``(i) Regulations by corporation.--The 
                        Corporation shall promulgate regulations that 
                        establish standards for the submission and 
                        Board review of proposed pilot products 
                        submitted to the Board under this paragraph 
                        regarding the issues described in subclauses 
                        (I) through (VII) of subparagraph (H)(i).
                            ``(ii) Documentation by providers.--The 
                        standards shall, at a minimum, specify what 
                        information and documentation shall be required 
                        of an initiating approved insurance provider 
                        regarding the issues described in subclauses 
                        (I) through (VII) of subparagraph (H)(i).
                            ``(iii) Procedure.--The standards 
                        established by the Corporation shall also 
                        include procedures to carry out the following 
                        requirements:
                                    ``(I) Presentation.--The Board 
                                shall provide an applicant the 
                                opportunity to present the proposed 
                                pilot product to the Board in person.
                                    ``(II) Notification.--
                                            ``(aa) Period for 
                                        approval.--A proposed pilot 
                                        product submitted to the Board 
                                        shall be deemed to be approved 
                                        unless the Board disapproves 
                                        the proposed pilot product by 
                                        the date that is 60 business 
                                        days after the date of 
                                        submission.
                                            ``(bb) Notice of 
                                        disapproval.--Not later than 15 
                                        days prior to disapproving a 
                                        proposed pilot product 
                                        submitted by an applicant, the 
                                        Board shall provide the 
                                        applicant with notification of 
                                        intent to disapprove the 
                                        proposed pilot product.
                                            ``(cc) Right to modify.--An 
                                        applicant that receives a 
                                        notice of intent to disapprove 
                                        the proposed pilot product may 
                                        modify the proposed pilot 
                                        product of the applicant.
                                            ``(dd) Original 
                                        application.--For purposes of 
                                        this subclause, any 
                                        modification shall be 
                                        considered to be an original 
                                        proposed pilot product.
                                            ``(ee) Notice of intent to 
                                        modify.--An applicant shall 
                                        provide to the Board notice of 
                                        intent to modify the proposed 
                                        pilot product within 5 business 
                                        days after receiving the 
                                        notification of intent to 
                                        disapprove the proposed pilot 
                                        product.
                                            ``(ff) Timing.--In 
                                        establishing standards under 
                                        this subclause, the Board shall 
                                        prescribe a time deadline for 
                                        the submission of proposed 
                                        pilot products that approved 
                                        insurance providers expect to 
                                        market during the next 
                                        reinsurance year.
                    ``(J) Confidentiality.--
                            ``(i) Submitted proposed pilot products.--
                        Subject to clause (ii), a proposed pilot 
                        product submitted to the Board under this 
                        paragraph shall be considered to be 
                        confidential commercial or financial 
                        information for purposes of section 552(b)(4) 
                        of title 5, United States Code.
                            ``(ii) Approved proposed pilot products.--
                        Subject to clause (iii), a general summary of 
                        the content of the pilot product shall be made 
available to other approved insurance providers at the time the 
proposed pilot product is approved by the Board, consisting of a 
description of--
                                    ``(I) the identity of the provider;
                                    ``(II) the coverage; and
                                    ``(III) the pilot area.
                            ``(iii) Regulations.--
                                    ``(I) In general.--The Corporation 
                                shall by regulation prescribe the 
                                standard for confidentiality and the 
                                type of information contained in a 
                                proposed pilot product that shall not 
                                be available to other approved 
                                insurance providers.
                                    ``(II) Standard of 
                                confidentiality.--If information 
                                concerning a pilot product of an 
                                approved insurance provider satisfies 
                                the standard for privileged or 
                                confidential information pertaining to 
                                trade secrets and commercial or 
                                financial information under section 
                                552(b)(4) of title 5, United States 
                                Code, the information shall not be 
                                released to the public.
                    ``(K) Marketing of pilot products.--
                            ``(i) In general.--On approval of a pilot 
                        product by the Board, the pilot product may be 
                        marketed to producers of commodities at 
                        actuarially appropriate rates.
                            ``(ii) Delivery by other approved 
                        providers.--
                                    ``(I) In general.--An approved 
                                insurance provider that desires to 
                                market a pilot product of an initiating 
                                approved insurance provider shall pay a 
                                fee for the right to market the pilot 
                                product if a fee is required by the 
                                initiating approved insurance provider.
                                    ``(II) Terms of fee.--The 
                                initiating approved insurance provider 
                                may determine the amount of the fee to 
                                be charged to, and all other terms 
                                involving payment of the fee by, the 
                                other approved insurance provider.
                    ``(L) Payment of part of premium.--
                            ``(i) Definition of gross premium.--In this 
                        subparagraph, the term `gross premium' means an 
                        amount, as determined by an approved insurance 
                        provider, of premium sufficient to cover 
                        projected indemnities and expenses of the 
                        approved insurance provider, taking into 
                        consideration expected loss payments, expenses, 
                        capital allocations, and other expense factors 
                        normally taken into account in insurance 
                        rating.
                            ``(ii) Percentage of gross premium paid by 
                        corporation.--Subject to clause (iii), the 
                        Corporation shall pay a part of the gross 
                        premium for each eligible contract for a pilot 
                        product that is equal to--
                                    ``(I) 63.86 percent of the gross 
                                premium for coverage equal to 50 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(II) 56.69 percent of the gross 
                                premium for coverage equal to 55 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(III) 50.03 percent of the gross 
                                premium for coverage equal to 60 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(IV) 53.19 percent of the gross 
                                premium for coverage equal to 65 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(V) 45.28 percent of the gross 
                                premium for coverage equal to 70 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(VI) 38.55 percent of the gross 
                                premium for coverage equal to 75 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage;
                                    ``(VII) 33.61 percent of the gross 
                                premium for coverage equal to 80 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage; and
                                    ``(VIII) 30.09 percent of the gross 
                                premium for coverage equal to 85 
                                percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent or less of the expected market 
                                price, or an equivalent coverage.
                            ``(iii) Maximum percentage of gross 
                        premium.--The part of the gross premium that 
                        the Corporation may pay for a pilot product 
                        shall not exceed--
                                    ``(I) in the case of coverage below 
                                65 percent of the recorded or appraised 
                                average yield indemnified at 100 
                                percent of the expected market price, 
                                or an equivalent coverage, but greater 
                                than 50 percent of the recorded or 
                                appraised average yield indemnified at 
                                100 percent of the expected market 
                                price, or an equivalent coverage, the 
                                amount determined under subsection 
                                (e)(2)(B); or
                                    ``(II) in the case of coverage 
                                equal to or greater than 65 percent of 
                                the recorded or appraised average yield 
                                indemnified at 100 percent of the 
                                expected market price, or an equivalent 
                                coverage, on an individual or area 
                                basis, the amount determined under 
                                subsection (e)(2)(C).
                            ``(iv) Notice.--The Corporation shall 
                        provide the insured producer with notice 
                        concerning the amount of the part of the 
                        premium paid under this subparagraph.
                    ``(M) Compliance and regulation.--
                            ``(i) Regulation of fraud and abuse.--In 
                        light of the continually changing nature of 
                        agricultural risk, the Corporation shall 
                        simplify, to the maximum extent practicable, 
                        the administration and regulation of the pilot 
                        program established under this paragraph, with 
                        an emphasis on--
                                    ``(I) the regulation of fraud and 
                                abuse; and
                                    ``(II) the compliance of each 
                                approved insurance provider in 
                                marketing pilot products.
                            ``(ii) Costs versus benefits.--The 
                        Corporation shall consider and document the 
                        likely costs and benefits of a compliance or 
                        other regulatory requirement under this 
                        paragraph prior to imposing the requirement on 
                        an approved insurance provider or producer.
                            ``(iii) Duplicate coverage not allowed.--A 
                        producer shall not be eligible to purchase a 
                        contract for a pilot product under this 
                        paragraph if the producer (in the same 
                        reinsurance year for the same commodity)--
                                    ``(I) has obtained coverage through 
                                a plan of insurance authorized under 
                                subsections (b) or (c); or
                                    ``(II) is eligible for noninsured 
                                crop disaster assistance under section 
                                196 of the Agricultural Market 
                                Transition Act (7 U.S.C. 7333).
                    ``(N) Limitation on funding.--The Corporation and 
                the Board shall not use any appropriated funds, any 
                funds from the insurance fund established under section 
                516, or any funds from the Commodity Credit 
                Corporation, for the development of pilot products 
                under this paragraph.
                    ``(O) Premium limitation.--
                            ``(i) Definition of premium.--In this 
                        subparagraph, the term `premium' means the 
                        aggregate amount of gross premium (as defined 
                        in subparagraph (L)(i)) paid for all pilot 
                        products that is necessary to cover projected 
                        indemnities, as determined by the Corporation.
                            ``(ii) Limitation.--The total amount of 
                        premium shall not exceed--
                                    ``(I) $10,000,000 for the 2001 
                                reinsurance year;
                                    ``(II) $15,000,000 for the 2002 
                                reinsurance year;
                                    ``(III) $25,000,000 for the 2003 
                                reinsurance year; and
                                    ``(IV) $40,000,000 for the 2004 
                                reinsurance year.
                    ``(P) Reinsurance years.--This paragraph shall 
                apply to each of the 2001 through 2004 reinsurance 
                years.''.

SEC. 207. LIMITATION ON DOUBLE INSURANCE.

    Section 508(n) of the Federal Crop Insurance Act (7 U.S.C. 1508(n)) 
is amended--
            (1) by striking ``If a producer'' and inserting the 
        following:
            ``(1) In general.--If a producer''; and
            (2) by adding at the end the following:
            ``(2) Limitation on double insurance.--The Corporation may 
        offer plans of insurance or reinsurance for only 1 agricultural 
        commodity produced on specific acreage during a crop year, 
        unless--
                    ``(A) there is an established practice of double-
                cropping in an area, as determined by the Corporation;
                    ``(B) the additional plan of insurance is offered 
                with respect to an agricultural commodity that is 
                customarily double-cropped in the area; and
                    ``(C) the producer has a history of double cropping 
                or the specific acreage has historically been double-
                cropped.''.

                         TITLE III--REGULATIONS

SEC. 301. REGULATIONS.

    (a) In General.--Except as provided in subsection (b), not later 
than 60 days after the date of enactment of this Act, the Secretary of 
Agriculture shall promulgate regulations to carry out this Act and the 
amendments made by this Act.
    (b) Exceptions.--Not later than 180 days after the date of 
enactment of this Act, the Secretary shall promulgate regulations to 
carry out--
            (1) paragraphs (7) and (8) of section 102(b); and
            (2) paragraphs (4) and (5) of section 508(m) of the Federal 
        Crop Insurance Act (7 U.S.C. 1508(m)) (as amended by sections 
        205 and 206).
                                 <all>
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