II

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.

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 ‘‘Farmers’ Risk Management Act of 1999’’.

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

7 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.
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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.

1 TITLE I—RISK MANAGEMENT

2 PAYMENTS

3 SEC. 101. DEFINITIONS.

4 In this title:

5 (1) ACTUAL PRODUCTION HISTORY.—The term

6 ‘‘actual production history’’ means a determination

7 by the Corporation that establishes the average pro8 duction (yield and acreage) for the 2000 crop of an

9 agricultural commodity on the farm in accordance

10 with section 508(g)(2) of the Federal Crop Insur11 ance Act (7 U.S.C. 1508(g)(2)).

12 (2) AGRICULTURAL COMMODITY.—The term

13 ‘‘agricultural commodity’’ means each agricultural

14 commodity specified in section 518 of the Federal

15 Crop Insurance Act (7 U.S.C. 1518), excluding live16 stock, that is insurable, as determined by the Cor17 poration.
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1 (3) APPLICABLE CROP.—The term ‘‘applicable

2 crop’’ means each of the 2001 through 2004 crops

3 of an agricultural commodity produced by a pro4 ducer.

5 (4) APPLICABLE YEAR.—The term ‘‘applicable

6 year’’ means the year in which—

7 (A) the applicable crop is produced on the

8 farm of a producer; and

9 (B) the producer elects to receive a risk

10 management payment under a risk manage11 ment contract.

12 (5) ASSIGNED YIELD.—The term ‘‘assigned

13 yield’’ means a yield assigned by the Corporation to

14 determine the production of a producer (including a

15 new producer and a producer that has not previously

16 purchased crop insurance for an agricultural com17 modity) that—

18 (A) is determined by the Corporation in

19 accordance with section 508(g)(2) of the Fed20 eral Crop Insurance Act (7 U.S.C. 1508(g)(2));

21 and

22 (B) is assigned to a producer if the pro23 ducer cannot establish an actual production his24 tory.
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1 (6) CORPORATION.—The term ‘‘Corporation’’

2 means the Federal Crop Insurance Corporation.

3 (7) PRICE LEVEL.—The term ‘‘price level’’

4 means the price level for an agricultural commodity

5 on a yield and loss basis that is the average price

6 level established by the Corporation in accordance

7 with section 508(c)(5) of the Federal Crop Insur8 ance Act (7 U.S.C. 1508(c)(5)) for each of the 1997

9 through 1999 crops of the agricultural commodity,

10 as determined by the Corporation.

11 (8) PRINCIPAL AGRICULTURAL COMMODITY.—

12 The term ‘‘principal agricultural commodity’’ means

13 any commodity (including livestock and a commodity

14 that is not insurable under the Federal Crop Insur15 ance Act (7 U.S.C. 1501 et seq.)) produced on the

16 farm of a producer that comprises a significant per17 centage of the value of all commodities produced on

18 the farm, as determined by the Secretary.

19 (9) PRODUCER.—The term ‘‘producer’’ means a

20 person that is at risk in the production of an agri21 cultural commodity for which a risk management

22 payment under a risk management contract is

23 sought for an applicable year.

24 (10) REGULATED EXCHANGE.—The term ‘‘reg25 ulated exchange’’ means a board of trade (as defined
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1 in section 1a of the Commodity Exchange Act (7

2 U.S.C. 1a)) that is designated as a contract market

3 under section 2(a)(1)(B) of that Act (7 U.S.C. 2a).

4 (11) RISK MANAGEMENT CONTRACT.—The term

5 ‘‘risk management contract’’ means a contract en6 tered into under section 102 for an applicable crop

7 of an agricultural commodity of a producer.

8 (12) SECRETARY.—The term ‘‘Secretary’’

9 means the Secretary of Agriculture.

10 SEC. 102. RISK MANAGEMENT CONTRACT.

11 (a) OFFER AND CONSIDERATION.—

12 (1) OFFER.—The Secretary shall offer to enter

13 into a risk management contract for the 2001

14 through 2004 crops with each producer that is eligi15 ble to obtain a plan of insurance under the Federal

16 Crop Insurance Act (7 U.S.C. 1501 et seq.) for an

17 agricultural commodity of a producer.

18 (2) TERMS.—

19 (A) RISK MANAGEMENT PAYMENT.—Under

20 a risk management contract, for each agricul21 tural commodity produced by a producer for an

22 applicable crop, the Secretary shall pay the pro23 ducer a risk management payment.

24 (B) BASIS FOR PAYMENT.—The amount of

25 a risk management payment shall be based on
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1 the actual production history of each agricul2 tural commodity, as determined by the Corpora3 tion under subsection (c)(2).

4 (C) ELECTION OF PRODUCER.—A pro5 ducer may, for the applicable year—

6 (i) obtain a risk management pay7 ment; or

8 (ii) have an equal amount credited by

9 the Corporation to the premium owed by

10 the producer for 1 or more plans of Fed11 eral crop insurance purchased for the ap12 plicable year.

13 (D) QUALIFYING RISK MANAGEMENT

14 PRACTICES.—In exchange for the benefit of15 fered under subparagraph (A), a producer shall

16 use at least 2 qualifying risk management prac17 tices on the farm as provided in subsection (b).

18 (b) QUALIFYING RISK MANAGEMENT PRACTICES.—

19 To be eligible for a risk management payment under a

20 risk management contract for an applicable crop, a pro21 ducer shall obtain or use for the applicable crop at least

22 2 of the following qualifying risk management practices:

23 (1) CROP INSURANCE.—A producer may obtain

24 Federal crop insurance under the Federal Crop In25 surance Act (7 U.S.C. 1501 et seq.) or private crop
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1 insurance (such as hail coverage) for a principal ag2 ricultural commodity produced on the farm of the

3 producer for the applicable crop, at a level of cov4 erage that is at least equivalent to catastrophic risk

5 protection.

6 (2) FUTURE OR OPTION.—A producer may

7 enter into a future or option for a principal agricul8 tural commodity produced on the farm of the pro9 ducer for the applicable crop on a regulated ex10 change that is (as determined by the Secretary)—

11 (A)(i) in the case of a future, at least 1

12 regulated futures contract (as defined in section

13 1256(g) of the Internal Revenue Code of 1986);

14 and

15 (ii) in the case of an option, at least 1 list16 ed option (as defined in section 1256(g) of that

17 Code); and

18 (B) a hedging transaction (as defined in

19 section 1256(e)(2) of that Code) involving a

20 principal agricultural commodity that is used to

21 reduce production, price, or revenue risk.

22 (3) AGRICULTURAL TRADE OPTION.—A pro23 ducer may purchase, on other than a regulated ex24 change, an agricultural trade option for the applica25 ble crop of a principal agricultural commodity pro-
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1 duced on the farm of the producer that (as deter2 mined by the Secretary)—

3 (A) provides coverage for at least 10 per4 cent of the estimated monetary value of the

5 principal agricultural commodity;

6 (B) is an equity option (as defined in sec7 tion 1256(g) of the Internal Revenue Code of

8 1986); and

9 (C) is a hedging transaction (as defined in

10 section 1256(e)(2) of that Code) involving a

11 principal agricultural commodity that is used to

12 reduce production, price, or revenue risk.

13 (4) CASH FORWARD OR OTHER MARKETING

14 CONTRACT.—A producer may enter into a cash for15 ward or other type of marketing contract for at least

16 20 percent of the monetary value of a principal agri17 cultural commodity produced on the farm of the pro18 ducer for the applicable crop, as determined by the

19 Secretary.

20 (5) TRUST.—A producer may make a deposit of

21 an amount equal to at least 25 percent of the risk

22 management payment of the producer for the appli23 cable year into a trust authorized by statute for eli24 gible farming businesses that may be established to

25 accept tax deductible contributions.
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1 (6) AGRICULTURAL MARKETING AND RISK MAN2 AGEMENT EDUCATION.—A producer may attend and

3 complete in the applicable year an agricultural mar4 keting or risk management class or seminar ap5 proved by the Secretary, including a class or seminar

6 conducted by a broker who is licensed by a regulated

7 exchange.

8 (7) FINANCIAL RISK REDUCTION.—

9 (A) IN GENERAL.—A producer may use at

10 least 50 percent of the risk management pay11 ment of the producer for the applicable year to

12 achieve, as determined by the Secretary—

13 (i) a reduction of farm financial debt

14 in a manner that reduces farm business le15 verage; or

16 (ii) an increase of farm business li17 quidity.

18 (B) NOTICE AND COMMENT.—The applica19 tion of the notice and comment provisions of

20 section 553 of title 5, United States Code, to

21 this paragraph shall not delay the implementa22 tion of the other paragraphs of this subsection

23 by the Secretary.

24 (8) DIVERSIFICATION.—
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1 (A) IN GENERAL.—A producer may diver2 sify production on the farm of the producer by

3 producing at least 1 additional commodity on

4 the farm or by significantly increasing farm en5 terprise diversification in the applicable year, as

6 determined by the Secretary.

7 (B) NOTICE AND COMMENT.—The applica8 tion of the notice and comment provisions of

9 section 553 of title 5, United States Code, to

10 this paragraph shall not delay the implementa11 tion of the other paragraphs of this subsection

12 by the Secretary.

13 (c) DETERMINATION OF RISK MANAGEMENT PAY14 MENT.—

15 (1) AMOUNT AVAILABLE FOR EACH APPLICA16 BLE YEAR.—The Secretary shall, to the maximum

17 extent practicable, expend $1,275,000,000 for each

18 of the 2001 through 2004 crops to satisfy the obli19 gations of the Secretary under all risk management

20 contracts.

21 (2) CALCULATION.—A risk management pay22 ment for an agricultural commodity produced on the

23 farm of a producer for an applicable crop shall be

24 equal to the product obtained by multiplying—
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1 (A)(i) the actual production history of the

2 producer; or

3 (ii) if an actual production history is not

4 available, an assigned yield;

5 (B) the price level for the agricultural com6 modity; and

7 (C) subject to paragraph (1), a payment

8 rate determined by the Secretary.

9 SEC. 103. ADMINISTRATIVE PROVISIONS.

10 (a) CERTIFICATION.—

11 (1) IN GENERAL.—Not later than April 15 of

12 the year following an applicable year, a producer

13 shall submit to the Secretary a risk management

14 practices form that describes the qualifying risk

15 management practices that were obtained or used by

16 the producer during the applicable year.

17 (2) TIMING.—The Secretary may not require a

18 producer to submit the information described in

19 paragraph (1) prior to April 15 of the year following

20 the applicable year.

21 (3) CERTIFICATION OVER THE INTERNET.—

22 The Secretary shall, to the maximum extent prac23 ticable, facilitate the certification process required

24 under this paragraph by using the Internet.
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1 (b) COMPLIANCE.—The Secretary may perform ran2 dom audits of producers that obtain a risk management

3 payment to ensure that the producers obtained or used

4 the qualifying risk management practices described in the

5 form.

6 (c) TIMING OF BENEFITS.—

7 (1) RISK MANAGEMENT PAYMENT.—

8 (A) IN GENERAL.—For each applicable

9 crop, at the option of a producer that enters

10 into a risk management contract, the Secretary

11 shall pay the producer the full amount (or such

12 portion as the producer may specify) of the risk

13 management payment required to be paid for

14 the applicable year at such time or times during

15 that year as the producer may specify.

16 (B) LIMITATION.—The payment of a risk

17 management payment (or portion of a risk

18 management payment) under this paragraph

19 shall not occur prior to—

20 (i) for the 2001 crop, October 1,

21 2000;

22 (ii) for the 2002 crop, October 1,

23 2001;

24 (iii) for the 2003 crop, October 1,

25 2002; and
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1 (iv) for the 2004 crop, October 1,

2 2003.

3 (2) CREDIT TO PREMIUM OWED.—For each ap4 plicable crop, a producer that elects to have an

5 amount equal to the risk management payment of

6 the producer credited by the Corporation to the pre7 mium owed for a plan of Federal crop insurance for

8 an applicable crop shall receive the benefit at the

9 time the premium is paid by the producer.

10 (d) VIOLATION OF RISK MANAGEMENT CONTRACT.—

11 If a producer has accepted a risk management payment

12 for an applicable year and the producer fails to comply

13 with subsection (a)(1) or section 102(b) with respect to

14 the applicable year, the producer shall refund to the Sec15 retary an amount equal to the risk management payment.

16 (e) ASSIGNMENT AND SHARING OF BENEFITS.—

17 (1) ASSIGNMENT OF BENEFITS.—Assignment of

18 a benefit provided under this title shall be subject to

19 section 8(g) of the Soil Conservation and Domestic

20 Allotment Act (16 U.S.C. 590h(g)).

21 (2) NOTICE.—The producer making the assign22 ment, or the assignee, shall provide the Secretary

23 with notice, in such manner as the Secretary may

24 require in a risk management contract, of any as25 signment.
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1 (3) SHARING OF BENEFITS.—The Secretary

2 shall provide for the sharing of benefits under this

3 title among all producers that are at risk in the pro4 duction of an applicable crop on a fair and equitable

5 basis.

6 (f) USE OF COMMODITY CREDIT CORPORATION.—

7 The Secretary shall carry out this title using the funds,

8 facilities, and authorities of the Commodity Credit Cor9 poration.

10 SEC. 104. REPEAL; FUNDING.

11 (a) REPEAL.—This title (other than this section) is

12 repealed effective September 30, 2004.

13 (b) FUNDING.—Effective beginning September 30,

14 2004, the Secretary may not use the funds of the Com15 modity Credit Corporation, the Federal Crop Insurance

16 Corporation, or funds under any provision of law to pro17 vide risk management payments under this title or any

18 other provision of law.

19 (c) EFFECT ON RISK MANAGEMENT PAYMENTS OR

20 REDUCTIONS IN PREMIUM.—This section shall not affect

21 any requirements imposed on the Secretary or a producer

22 under this title (as in effect before September 30, 2004).

23 SEC. 105. CROPS.

24 This title shall apply to each applicable crop.
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1 TITLE II—CROP INSURANCE

2 SEC. 201. SANCTIONS FOR PROGRAM COMPLIANCE AND

3 FRAUD.

4 (a) IN GENERAL.—Section 506 of the Federal Crop

5 Insurance Act (7 U.S.C. 1506) is amended by striking

6 subsection (n) and inserting the following:

7 ‘‘(n) SANCTIONS.—

8 ‘‘(1) FALSE INFORMATION.—A producer, agent,

9 loss adjuster, approved insurance provider, or other

10 person that willfully and intentionally provides any

11 false or inaccurate information to the Corporation or

12 to an approved insurance provider with respect to a

13 policy or plan of insurance under this title may,

14 after notice and an opportunity for a hearing on the

15 record, be subject to 1 or more of the sanctions de16 scribed in paragraph (3).

17 ‘‘(2) COMPLIANCE.—An agent, loss adjuster,

18 approved insurance provider, or other person that is

19 determined by the Corporation to have willfully and

20 intentionally failed to comply with a requirement of

21 the Corporation or the Standard Reinsurance Agree22 ment may, after notice and an opportunity for a

23 hearing on the record, be subject to 1 or more of the

24 sanctions described in paragraph (3).
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1 ‘‘(3) AUTHORIZED SANCTIONS.—If the Sec2 retary determines that a person covered by this sub3 section has committed a material violation under

4 paragraph (1) or (2), the following sanctions may be

5 imposed:

6 ‘‘(A) CIVIL FINES.—A civil fine may be im7 posed for each violation in an amount not to ex8 ceed the greater of—

9 ‘‘(i) the amount of the pecuniary gain

10 obtained as a result of the false or inac11 curate information provided; or

12 ‘‘(ii) $10,000.

13 ‘‘(B) PRODUCERS.—In the case of a viola14 tion committed by a producer, the producer

15 may be disqualified for a period of up to 5

16 years from—

17 ‘‘(i) receiving any monetary or non18 monetary benefit provided—

19 ‘‘(I) under this title;

20 ‘‘(II) the Agricultural Market

21 Transition Act (7 U.S.C. 7201 et

22 seq.), including the noninsured crop

23 disaster assistance program under

24 section 196 of that Act (7 U.S.C.

25 7333);
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1 ‘‘(III) the Agricultural Act of

2 1949 (7 U.S.C. 1421 et seq.);

3 ‘‘(IV) the Commodity Credit Cor4 poration Charter Act (15 U.S.C. 714

5 et seq.);

6 ‘‘(V) the Agricultural Adjustment

7 Act of 1938 (7 U.S.C. 1281 et seq.);

8 ‘‘(VI) title XII of the Food Secu9 rity Act of 1985 (16 U.S.C. 3801 et

10 seq.); or

11 ‘‘(VII) the Consolidated Farm

12 and Rural Development Act (7 U.S.C.

13 1921 et seq.); and

14 ‘‘(ii) receiving any monetary or non15 monetary benefit provided under any law

16 to assist a producer of an agricultural

17 commodity affected by a crop loss or a de18 cline in the prices of agricultural commod19 ities.

20 ‘‘(C) OTHER PERSONS.—In the case of a

21 violation committed by an agent, loss adjuster,

22 approved insurance provider, or other person

23 (other than a producer), the violator may be

24 disqualified for a period of up to 5 years from
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1 participating in any program, or receiving any

2 benefit, under this title.

3 ‘‘(4) ASSESSMENT OF SANCTION.—The Sec4 retary shall consider the gravity of the violation of

5 the person covered by this subsection in

6 determining—

7 ‘‘(A) whether to impose a sanction under

8 this subsection; and

9 ‘‘(B) the amount of the sanction to be im10 posed.

11 ‘‘(5) DISCLOSURE OF SANCTIONS.—Each policy

12 or plan of insurance under this title shall promi13 nently indicate the sanctions prescribed under para14 graph (3) for willfully and intentionally—

15 ‘‘(A) providing false or inaccurate informa16 tion to the Corporation or to an approved insur17 ance provider; or

18 ‘‘(B) failing to comply with a requirement

19 of the Corporation or the Standard Reinsurance

20 Agreement.

21 ‘‘(6) INSURANCE FUND.—Any funds collected

22 under this subsection shall be deposited into the in23 surance fund established under section 516(c).’’.

24 (b) CONFORMING AMENDMENTS.—Section 516(c) of

25 the Federal Crop Insurance Act (7 U.S.C. 1516(c)) is
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1 amended by striking paragraph (1) and inserting the fol2 lowing:

3 ‘‘(1) IN GENERAL.—There is established the In4 surance Fund, which shall include (to remain avail5 able without fiscal year limitation)—

6 ‘‘(A) premium income;

7 ‘‘(B) amounts made available under sub8 section (a)(2); and

9 ‘‘(C) civil fines collected under section

10 508(k)(3)(B)(i)(II).’’.

11 SEC. 202. OVERSIGHT OF LOSS ADJUSTMENT.

12 Section 506(q) of the Federal Crop Insurance Act (7

13 U.S.C. 1506(q)) is amended by adding at the end the fol14 lowing:

15 ‘‘(3) OVERSIGHT OF LOSS ADJUSTMENT.—The

16 Corporation shall—

17 ‘‘(A) develop procedures for an annual re18 view by an approved insurance provider of the

19 performance of each loss adjuster used by the

20 approved insurance provider;

21 ‘‘(B) oversee the annual review conducted

22 by each approved insurance provider; and

23 ‘‘(C) consult with each approved insurance

24 provider regarding any remedial action that is
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1 determined necessary as a result of the annual

2 review of a loss adjuster.

3 ‘‘(4) COMPLIANCE REPORTS.—Not later than

4 the end of each fiscal year, the Corporation shall

5 submit, to the Committee on Agriculture of the

6 House of Representatives, the Committee on Agri7 culture, Nutrition, and Forestry of the Senate, and

8 the Board, a report concerning compliance by ap9 proved insurance providers and loss adjusters with

10 this title, including any recommendations for legisla11 tive or administrative changes that could further im12 prove compliance.’’.

13 SEC. 203. REVENUE INSURANCE PILOT PROGRAM.

14 Section 508(h)(9)(A) of the Federal Crop Insurance

15 Act (7 U.S.C. 1508(h)(9)(A)) is amended by striking

16 ‘‘crop years 1997, 1998, 1999, and 2000,’’ and inserting

17 ‘‘the 1999 through 2004 crops,’’.

18 SEC. 204. REDUCTION IN UNDERWRITING GAINS AND

19 LOSSES FROM CATASTROPHIC RISK PROTEC20 TION.

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

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

24 ‘‘(8) REDUCTION IN UNDERWRITING GAINS AND

25 LOSSES FROM CATASTROPHIC RISK PROTECTION.—
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1 Effective for each of the 2001 through 2004 reinsur2 ance years, notwithstanding any other provision of

3 law, the reinsurance agreements of the Corporation

4 shall require that 50 percent of any premiums or

5 losses for catastrophic risk protection policies under

6 subsection (b) be included in the calculation of gains

7 or losses of an approved insurance provider.’’.

8 SEC. 205. WHOLE FARM REVENUE INSURANCE PILOT PRO9 GRAM.

10 Section 508(m) of the Federal Crop Insurance Act

11 (7 U.S.C. 1508(m)) is amended by adding at the end the

12 following:

13 ‘‘(4) WHOLE FARM REVENUE INSURANCE PILOT

14 PROGRAM.—

15 ‘‘(A) DEFINITION OF AGRICULTURAL EN16 TERPRISES.—In this paragraph, the term ‘agri17 cultural enterprises’ means the production and

18 marketing of agricultural commodities and live19 stock on a farm.

20 ‘‘(B) PURPOSE.—The purpose of this para21 graph is to authorize the Corporation to con22 duct a pilot program to—

23 ‘‘(i) determine whether whole farm

24 revenue insurance is a good risk manage-
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1 ment tool for agricultural enterprises on a

2 farm; and

3 ‘‘(ii) accumulate actuarial and rating

4 data necessary to establish permanent

5 whole farm revenue insurance coverage.

6 ‘‘(C) AUTHORITY.—The Corporation shall

7 conduct a pilot program under which a pro8 ducer of agricultural commodities or livestock

9 may obtain insurance that guarantees a level of

10 revenue for agricultural enterprises on the farm

11 of the producer.

12 ‘‘(D) REVENUE GUARANTEE.—The amount

13 of the revenue guarantee for agricultural enter14 prises on the farm of a producer for a taxable

15 year shall be equal to the product obtained by

16 multiplying—

17 ‘‘(i) the coverage level; by

18 ‘‘(ii) the lesser of—

19 ‘‘(I) the average adjusted gross

20 income for the previous 5 taxable

21 years, determined by taking into ac22 count only items of income, gain, de23 duction, or loss allocable to agricul24 tural enterprises on the farm, as de25 termined by the Corporation; or
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1 ‘‘(II) the estimated revenue of

2 the producer that will be earned from

3 agricultural enterprises on the farm of

4 the producer for the applicable year,

5 as determined by the Corporation.

6 ‘‘(E) COVERAGE LEVELS.—A participating

7 producer may elect a coverage level under this

8 paragraph that is 65, 75, or 80 percent of the

9 average adjusted gross income of the producer,

10 as determined under subparagraph (D)(i).

11 ‘‘(F) COVERAGE; LIMITATIONS.—

12 ‘‘(i) IN GENERAL.—Only revenue

13 earned from agricultural enterprises on the

14 farm of a producer shall be guaranteed

15 under this paragraph at the coverage level

16 selected by the producer.

17 ‘‘(ii) ALL AGRICULTURAL COMMOD18 ITIES AND LIVESTOCK.—Revenue from all

19 agricultural enterprises involving agricul20 tural commodities and livestock produced

21 on the farm of a producer, including agri22 cultural commodities and livestock that

23 were not insurable on the date of enact24 ment of this paragraph, shall be guaran25 teed under this paragraph.
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1 ‘‘(iii) PREMIUM LIMITATION.—

2 ‘‘(I) DEFINITION OF PREMIUM.—

3 In this clause, the term ‘premium’

4 means the aggregate premium paid by

5 all insured persons covered by the

6 pilot program authorized under this

7 paragraph for a reinsurance year, ex8 cluding the part of the premium paid

9 by the Corporation.

10 ‘‘(II) LIMITATION.—The total

11 amount of premiums shall not

12 exceed—

13 ‘‘(aa) $10,000,000 for the

14 2001 reinsurance year;

15 ‘‘(bb) $15,000,000 for the

16 2002 reinsurance year;

17 ‘‘(cc) $25,000,000 for the

18 2003 reinsurance year; and

19 ‘‘(dd) $40,000,000 for the

20 2004 reinsurance year.

21 ‘‘(iv) AREA LIMITATION.—

22 ‘‘(I) IN GENERAL.—The Corpora23 tion shall the limit the number of

24 counties in which producers are eligi-
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1 ble to participate in the pilot program

2 authorized under this paragraph.

3 ‘‘(II) STANDARDS.—In carrying

4 out subclause (I), the Corporation

5 shall ensure that—

6 ‘‘(aa) all regions of the

7 United States are covered; and

8 ‘‘(bb) sufficient actuarial

9 data can be obtained.

10 ‘‘(G) ADMINISTRATION.—In providing a

11 policy of whole farm revenue insurance to an in12 sured producer under this paragraph, the Cor13 poration shall—

14 ‘‘(i) offer the policy through reinsur15 ance agreements with private insurance

16 companies;

17 ‘‘(ii) ensure that the policy is actuari18 ally sound;

19 ‘‘(iii) require the insured producer to

20 pay premiums and administrative fees for

21 the policy in accordance with this section;

22 and

23 ‘‘(iv) pay a portion of the premium for

24 the policy in an amount that does not ex25 ceed the amount authorized under sub-
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1 section (e), except that the portion of pre2 mium paid for livestock shall be deter3 mined by the Corporation.

4 ‘‘(H) REINSURANCE YEARS.—This para5 graph shall apply to each of the 2001 through

6 2004 reinsurance years.’’.

7 SEC. 206. PRODUCT INNOVATION AND RATE COMPETITION

8 PILOT PROGRAM.

9 Section 508(m) of the Federal Crop Insurance Act

10 (7 U.S.C. 1508(m)) (as amended by section 205) is

11 amended by adding at the end the following:

12 ‘‘(5) PRODUCT INNOVATION AND RATE COM13 PETITION PILOT PROGRAM.—

14 ‘‘(A) PURPOSE.—The purpose of the pilot

15 program established under this paragraph is to

16 determine what incentives are necessary to en17 courage approved insurance providers to—

18 ‘‘(i) develop and offer innovative risk

19 management products to producers; and

20 ‘‘(ii) competitively rate premiums for

21 the risk management products.

22 ‘‘(B) DEFINITIONS.—In this paragraph:

23 ‘‘(i) INITIATING APPROVED INSUR24 ANCE PROVIDER.—The term ‘initiating ap-
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1 proved insurance provider’ means an insur2 ance provider that has—

3 ‘‘(I) been approved by the Cor4 poration to deliver plans of insurance

5 under this title; and

6 ‘‘(II) researched and developed a

7 pilot product that has been proposed

8 to, and approved by, the Board.

9 ‘‘(ii) PILOT PRODUCT.—The term

10 ‘pilot product’ means a risk management

11 product that has been researched and de12 veloped by an approved insurance provider

13 and approved by the Board for—

14 ‘‘(I) loss of yield or revenue in15 surance coverage for 1 or more com16 modities (including commodities that

17 are not insurable under this title as of

18 the date of enactment of this para19 graph, but excluding livestock);

20 ‘‘(II) rates of premium for the

21 risk management product; and

22 ‘‘(III) associated underwriting

23 systems for the risk management

24 product.

25 ‘‘(C) APPROVED INSURANCE PROVIDERS.—
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•S 1666 IS

1 ‘‘(i) IN GENERAL.—Subject to clause

2 (ii), the Corporation shall establish a pilot

3 program under which only an insurance

4 provider that has been approved by the

5 Corporation to deliver plans of insurance

6 under this title and the Standard Reinsur7 ance Agreement may propose to the

8 Board—

9 ‘‘(I) a pilot product;

10 ‘‘(II) rates of premium for the

11 pilot product; and

12 ‘‘(III) associated underwriting

13 systems for the pilot product.

14 ‘‘(ii) LACK OF PARTICIPATION BY

15 PROVIDERS.—

16 ‘‘(I) IN GENERAL.—If (for any

17 reinsurance year beginning 1 year or

18 more after the date on which the Sec19 retary promulgates rules to carry out

20 this paragraph) at least 3 approved

21 insurance providers have not obtained

22 approval for a pilot product, the Cor23 poration may approve any insurance

24 provider that desires to participate in
29

•S 1666 IS

1 the pilot program established under

2 this paragraph that—

3 ‘‘(aa) is licensed by an ap4 propriate State insurance author5 ity; and

6 ‘‘(bb) satisfies the financial

7 standards required of an ap8 proved insurance provider.

9 ‘‘(II) CONSIDERED APPROVED.—

10 An insurance provider that the Cor11 poration approves under subclause (I)

12 shall be considered to be an approved

13 insurance provider for the purposes of

14 this paragraph.

15 ‘‘(iii) MARKETING IN PILOT AREA.—

16 An approved insurance provider marketing

17 a pilot product under this paragraph shall

18 not be required to market the pilot product

19 in every county of a pilot area determined

20 under subparagraph (D).

21 ‘‘(D) PILOT AREA.—

22 ‘‘(i) DETERMINATION BY INITIATING

23 APPROVED INSURANCE PROVIDER.—Sub24 ject to clauses (ii) and (iii), an initiating

25 approved insurance provider marketing a
30

•S 1666 IS

1 pilot product shall determine the size and

2 location of a pilot area.

3 ‘‘(ii) LIMITATION.—Subject to clause

4 (iii), the size of the area in which the pilot

5 program established under this paragraph

6 is conducted shall not exceed—

7 ‘‘(I) in the case of the initial year

8 of the pilot program, 10 counties in

9 each of 3 States; and

10 ‘‘(II) in the case of each subse11 quent year of the pilot program, 20

12 counties in each of 6 States.

13 ‘‘(iii) ADJUSTMENTS.—The Board

14 may increase the size of the pilot area to

15 the extent that the Board determines that

16 a larger pilot area is necessary to validate

17 the results of the pilot program.

18 ‘‘(E) RELATIONSHIP TO TITLE.—

19 ‘‘(i) IN GENERAL.—Each requirement

20 of this title shall apply to a pilot product

21 under this paragraph only to the extent

22 that the requirement does not conflict with

23 the requirements and purposes of this

24 paragraph, as determined by the Corpora25 tion.
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•S 1666 IS

1 ‘‘(ii) INAPPLICABLE REQUIRE2 MENTS.—Requirements of this title that

3 shall not apply to a pilot product include

4 the requirements—

5 ‘‘(I) concerning actuarial sound6 ness;

7 ‘‘(II) concerning levels of cov8 erage;

9 ‘‘(III) concerning rates of pre10 mium;

11 ‘‘(IV) that the price level for cov12 erage for each insured commodity

13 must equal the expected market price

14 for the commodity as established by

15 the Board; and

16 ‘‘(V) that an approved insurance

17 provider shall provide coverage of the

18 pilot product throughout a State for

19 all commodities if the approved insur20 ance provider elects to provide any

21 coverage in the State.

22 ‘‘(F) REVIEW BY THE BOARD.—A proposal

23 that applies to the type of insurance coverage,

24 rates of premium for the pilot product, or asso25 ciated underwriting systems for the pilot prod-
32

•S 1666 IS

1 uct that are submitted to the Board shall be re2 viewed by the Board.

3 ‘‘(G) SUBMISSIONS BY PROVIDERS.—In ac4 cordance with standards established under sub5 paragraph (I), an initiating approved insurance

6 provider shall include in a proposal to the

7 Board for a pilot product information on all

8 issues described in subclauses (I) through (VII)

9 of subparagraph (H)(i).

10 ‘‘(H) STANDARDS.—

11 ‘‘(i) IN GENERAL.—The Board shall

12 approve a proposed pilot product for sub13 sidy and reinsurance as provided in this

14 paragraph if the Board finds that the pro15 posal of the initiating approved insurance

16 provider has adequately ensured that—

17 ‘‘(I) the interests of producers of

18 commodities are adequately protected

19 by the pilot product;

20 ‘‘(II) premiums charged to pro21 ducers are actuarially appropriate;

22 ‘‘(III) the associated under23 writing system of the proposed pilot

24 product is appropriate and adequate;
33

•S 1666 IS

1 ‘‘(IV) the proposed pilot product

2 is reinsured under this title or

3 through private reinsurance or is self4 insured;

5 ‘‘(V) the size and 1 or more loca6 tions of the pilot area are adequate;

7 ‘‘(VI) plans for quality assur8 ance, auditing, and regulatory compli9 ance are consistent with standard reg10 ulatory procedures of State depart11 ments of insurance and financial au12 diting procedures of publicly traded

13 companies; and

14 ‘‘(VII) insurance protection

15 against the risk covered by the pro16 posed pilot product is not generally

17 available from private plans of insur18 ance that are not covered by this title.

19 ‘‘(ii) RATES OF PREMIUM.—A pro20 posed rate of premium (including the part

21 of premium paid by the Corporation) shall

22 be considered adequate if the rate is suffi23 cient to cover projected losses and expenses

24 of the approved insurance provider, taking

25 into consideration expected loss payments,
34

•S 1666 IS

1 expenses, capital allocations, and other ex2 pense factors normally taken into account

3 in insurance rating.

4 ‘‘(iii) PROPOSED UNDERWRITING

5 PLANS.—A proposed underwriting plan for

6 a pilot product may be on a class or indi7 vidual farm basis, and shall at a minimum

8 specify factors such as yield history for the

9 farm or region, soils and resource quality

10 for the farm, and farm production prac11 tices.

12 ‘‘(iv) REINSURANCE.—

13 ‘‘(I) FEDERAL REINSURANCE.—

14 Subject to subclause (III) and not15 withstanding any other provision of

16 this title, the Corporation shall, to the

17 maximum extent practicable, make re18 insurance available to an approved in19 surance provider under this para20 graph.

21 ‘‘(II) PRIVATE OR FEDERAL RE22 INSURANCE.—An approved insurance

23 provider may—
35

•S 1666 IS

1 ‘‘(aa) apply private reinsur2 ance to the pilot product of the

3 approved insurance provider;

4 ‘‘(bb) obtain reinsurance for

5 the pilot product under this title;

6 or

7 ‘‘(cc) self-insure the pilot

8 product.

9 ‘‘(III) ASSIGNMENT TO COMMER10 CIAL FUND.—A contract for pilot

11 products that receives reinsurance

12 under this title shall be assigned to

13 the commercial fund for proportional

14 reinsurance as provided in the Stand15 ard Reinsurance Agreement.

16 ‘‘(IV) ACTUARIALLY APPRO17 PRIATE.—The Board shall prescribe

18 standards for rating premiums that

19 are actuarially appropriate considering

20 the risk inherent in a pilot product.

21 ‘‘(I) STANDARDS FOR SUBMISSION AND

22 REVIEW.—

23 ‘‘(i) REGULATIONS BY CORPORA24 TION.—The Corporation shall promulgate

25 regulations that establish standards for the
36

•S 1666 IS

1 submission and Board review of proposed

2 pilot products submitted to the Board

3 under this paragraph regarding the issues

4 described in subclauses (I) through (VII)

5 of subparagraph (H)(i).

6 ‘‘(ii) DOCUMENTATION BY PRO7 VIDERS.—The standards shall, at a min8 imum, specify what information and docu9 mentation shall be required of an initiating

10 approved insurance provider regarding the

11 issues described in subclauses (I) through

12 (VII) of subparagraph (H)(i).

13 ‘‘(iii) PROCEDURE.—The standards

14 established by the Corporation shall also

15 include procedures to carry out the fol16 lowing requirements:

17 ‘‘(I) PRESENTATION.—The

18 Board shall provide an applicant the

19 opportunity to present the proposed

20 pilot product to the Board in person.

21 ‘‘(II) NOTIFICATION.—

22 ‘‘(aa) PERIOD FOR AP23 PROVAL.—A proposed pilot prod24 uct submitted to the Board shall

25 be deemed to be approved unless
37

•S 1666 IS

1 the Board disapproves the pro2 posed pilot product by the date

3 that is 60 business days after the

4 date of submission.

5 ‘‘(bb) NOTICE OF DIS6 APPROVAL.—Not later than 15

7 days prior to disapproving a pro8 posed pilot product submitted by

9 an applicant, the Board shall

10 provide the applicant with notifi11 cation of intent to disapprove the

12 proposed pilot product.

13 ‘‘(cc) RIGHT TO MODIFY.—

14 An applicant that receives a no15 tice of intent to disapprove the

16 proposed pilot product may mod17 ify the proposed pilot product of

18 the applicant.

19 ‘‘(dd) ORIGINAL APPLICA20 TION.—For purposes of this sub21 clause, any modification shall be

22 considered to be an original pro23 posed pilot product.

24 ‘‘(ee) NOTICE OF INTENT TO

25 MODIFY.—An applicant shall pro-
38

•S 1666 IS

1 vide to the Board notice of intent

2 to modify the proposed pilot

3 product within 5 business days

4 after receiving the notification of

5 intent to disapprove the proposed

6 pilot product.

7 ‘‘(ff) TIMING.—In estab8 lishing standards under this sub9 clause, the Board shall prescribe

10 a time deadline for the submis11 sion of proposed pilot products

12 that approved insurance pro13 viders expect to market during

14 the next reinsurance year.

15 ‘‘(J) CONFIDENTIALITY.—

16 ‘‘(i) SUBMITTED PROPOSED PILOT

17 PRODUCTS.—Subject to clause (ii), a pro18 posed pilot product submitted to the Board

19 under this paragraph shall be considered

20 to be confidential commercial or financial

21 information for purposes of section

22 552(b)(4) of title 5, United States Code.

23 ‘‘(ii) APPROVED PROPOSED PILOT

24 PRODUCTS.—Subject to clause (iii), a gen25 eral summary of the content of the pilot
39

•S 1666 IS

1 product shall be made available to other

2 approved insurance providers at the time

3 the proposed pilot product is approved by

4 the Board, consisting of a description of—

5 ‘‘(I) the identity of the provider;

6 ‘‘(II) the coverage; and

7 ‘‘(III) the pilot area.

8 ‘‘(iii) REGULATIONS.—

9 ‘‘(I) IN GENERAL.—The Corpora10 tion shall by regulation prescribe the

11 standard for confidentiality and the

12 type of information contained in a

13 proposed pilot product that shall not

14 be available to other approved insur15 ance providers.

16 ‘‘(II) STANDARD OF CONFIDEN17 TIALITY.—If information concerning a

18 pilot product of an approved insur19 ance provider satisfies the standard

20 for privileged or confidential informa21 tion pertaining to trade secrets and

22 commercial or financial information

23 under section 552(b)(4) of title 5,

24 United States Code, the information

25 shall not be released to the public.
40

•S 1666 IS

1 ‘‘(K) MARKETING OF PILOT PRODUCTS.—

2 ‘‘(i) IN GENERAL.—On approval of a

3 pilot product by the Board, the pilot prod4 uct may be marketed to producers of com5 modities at actuarially appropriate rates.

6 ‘‘(ii) DELIVERY BY OTHER APPROVED

7 PROVIDERS.—

8 ‘‘(I) IN GENERAL.—An approved

9 insurance provider that desires to

10 market a pilot product of an initiating

11 approved insurance provider shall pay

12 a fee for the right to market the pilot

13 product if a fee is required by the ini14 tiating approved insurance provider.

15 ‘‘(II) TERMS OF FEE.—The initi16 ating approved insurance provider

17 may determine the amount of the fee

18 to be charged to, and all other terms

19 involving payment of the fee by, the

20 other approved insurance provider.

21 ‘‘(L) PAYMENT OF PART OF PREMIUM.—

22 ‘‘(i) DEFINITION OF GROSS PRE23 MIUM.—In this subparagraph, the term

24 ‘gross premium’ means an amount, as de25 termined by an approved insurance pro-
41

•S 1666 IS

1 vider, of premium sufficient to cover pro2 jected indemnities and expenses of the ap3 proved insurance provider, taking into con4 sideration expected loss payments, ex5 penses, capital allocations, and other ex6 pense factors normally taken into account

7 in insurance rating.

8 ‘‘(ii) PERCENTAGE OF GROSS PRE9 MIUM PAID BY CORPORATION.—Subject to

10 clause (iii), the Corporation shall pay a

11 part of the gross premium for each eligible

12 contract for a pilot product that is equal

13 to—

14 ‘‘(I) 63.86 percent of the gross

15 premium for coverage equal to 50 per16 cent of the recorded or appraised av17 erage yield indemnified at 100 percent

18 or less of the expected market price,

19 or an equivalent coverage;

20 ‘‘(II) 56.69 percent of the gross

21 premium for coverage equal to 55 per22 cent of the recorded or appraised av23 erage yield indemnified at 100 percent

24 or less of the expected market price,

25 or an equivalent coverage;
42

•S 1666 IS

1 ‘‘(III) 50.03 percent of the gross

2 premium for coverage equal to 60 per3 cent of the recorded or appraised av4 erage yield indemnified at 100 percent

5 or less of the expected market price,

6 or an equivalent coverage;

7 ‘‘(IV) 53.19 percent of the gross

8 premium for coverage equal to 65 per9 cent of the recorded or appraised av10 erage yield indemnified at 100 percent

11 or less of the expected market price,

12 or an equivalent coverage;

13 ‘‘(V) 45.28 percent of the gross

14 premium for coverage equal to 70 per15 cent of the recorded or appraised av16 erage yield indemnified at 100 percent

17 or less of the expected market price,

18 or an equivalent coverage;

19 ‘‘(VI) 38.55 percent of the gross

20 premium for coverage equal to 75 per21 cent of the recorded or appraised av22 erage yield indemnified at 100 percent

23 or less of the expected market price,

24 or an equivalent coverage;
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•S 1666 IS

1 ‘‘(VII) 33.61 percent of the gross

2 premium for coverage equal to 80 per3 cent of the recorded or appraised av4 erage yield indemnified at 100 percent

5 or less of the expected market price,

6 or an equivalent coverage; and

7 ‘‘(VIII) 30.09 percent of the

8 gross premium for coverage equal to

9 85 percent of the recorded or ap10 praised average yield indemnified at

11 100 percent or less of the expected

12 market price, or an equivalent cov13 erage.

14 ‘‘(iii) MAXIMUM PERCENTAGE OF

15 GROSS PREMIUM.—The part of the gross

16 premium that the Corporation may pay for

17 a pilot product shall not exceed—

18 ‘‘(I) in the case of coverage below

19 65 percent of the recorded or ap20 praised average yield indemnified at

21 100 percent of the expected market

22 price, or an equivalent coverage, but

23 greater than 50 percent of the re24 corded or appraised average yield in25 demnified at 100 percent of the ex-
44

•S 1666 IS

1 pected market price, or an equivalent

2 coverage, the amount determined

3 under subsection (e)(2)(B); or

4 ‘‘(II) in the case of coverage

5 equal to or greater than 65 percent of

6 the recorded or appraised average

7 yield indemnified at 100 percent of

8 the expected market price, or an

9 equivalent coverage, on an individual

10 or area basis, the amount determined

11 under subsection (e)(2)(C).

12 ‘‘(iv) NOTICE.—The Corporation shall

13 provide the insured producer with notice

14 concerning the amount of the part of the

15 premium paid under this subparagraph.

16 ‘‘(M) COMPLIANCE AND REGULATION.—

17 ‘‘(i) REGULATION OF FRAUD AND

18 ABUSE.—In light of the continually chang19 ing nature of agricultural risk, the Cor20 poration shall simplify, to the maximum

21 extent practicable, the administration and

22 regulation of the pilot program established

23 under this paragraph, with an emphasis

24 on—
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•S 1666 IS

1 ‘‘(I) the regulation of fraud and

2 abuse; and

3 ‘‘(II) the compliance of each ap4 proved insurance provider in mar5 keting pilot products.

6 ‘‘(ii) COSTS VERSUS BENEFITS.—The

7 Corporation shall consider and document

8 the likely costs and benefits of a compli9 ance or other regulatory requirement under

10 this paragraph prior to imposing the re11 quirement on an approved insurance pro12 vider or producer.

13 ‘‘(iii) DUPLICATE COVERAGE NOT AL14 LOWED.—A producer shall not be eligible

15 to purchase a contract for a pilot product

16 under this paragraph if the producer (in

17 the same reinsurance year for the same

18 commodity)—

19 ‘‘(I) has obtained coverage

20 through a plan of insurance author21 ized under subsections (b) or (c); or

22 ‘‘(II) is eligible for noninsured

23 crop disaster assistance under section

24 196 of the Agricultural Market Tran25 sition Act (7 U.S.C. 7333).
46

•S 1666 IS

1 ‘‘(N) LIMITATION ON FUNDING.—The Cor2 poration and the Board shall not use any ap3 propriated funds, any funds from the insurance

4 fund established under section 516, or any

5 funds from the Commodity Credit Corporation,

6 for the development of pilot products under this

7 paragraph.

8 ‘‘(O) PREMIUM LIMITATION.—

9 ‘‘(i) DEFINITION OF PREMIUM.—In

10 this subparagraph, the term ‘premium’

11 means the aggregate amount of gross pre12 mium (as defined in subparagraph (L)(i))

13 paid for all pilot products that is necessary

14 to cover projected indemnities, as deter15 mined by the Corporation.

16 ‘‘(ii) LIMITATION.—The total amount

17 of premium shall not exceed—

18 ‘‘(I) $10,000,000 for the 2001

19 reinsurance year;

20 ‘‘(II) $15,000,000 for the 2002

21 reinsurance year;

22 ‘‘(III) $25,000,000 for the 2003

23 reinsurance year; and

24 ‘‘(IV) $40,000,000 for the 2004

25 reinsurance year.
47

•S 1666 IS

1 ‘‘(P) REINSURANCE YEARS.—This para2 graph shall apply to each of the 2001 through

3 2004 reinsurance years.’’.

4 SEC. 207. LIMITATION ON DOUBLE INSURANCE.

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

6 U.S.C. 1508(n)) is amended—

7 (1) by striking ‘‘If a producer’’ and inserting

8 the following:

9 ‘‘(1) IN GENERAL.—If a producer’’; and

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

11 ‘‘(2) LIMITATION ON DOUBLE INSURANCE.—

12 The Corporation may offer plans of insurance or re13 insurance for only 1 agricultural commodity pro14 duced on specific acreage during a crop year,

15 unless—

16 ‘‘(A) there is an established practice of

17 double-cropping in an area, as determined by

18 the Corporation;

19 ‘‘(B) the additional plan of insurance is of20 fered with respect to an agricultural commodity

21 that is customarily double-cropped in the area;

22 and

23 ‘‘(C) the producer has a history of double

24 cropping or the specific acreage has historically

25 been double-cropped.’’.
48

•S 1666 IS

1 TITLE III—REGULATIONS

2 SEC. 301. REGULATIONS.

3 (a) IN GENERAL.—Except as provided in subsection

4 (b), not later than 60 days after the date of enactment

5 of this Act, the Secretary of Agriculture shall promulgate

6 regulations to carry out this Act and the amendments

7 made by this Act.

8 (b) EXCEPTIONS.—Not later than 180 days after the

9 date of enactment of this Act, the Secretary shall promul10 gate regulations to carry out—

11 (1) paragraphs (7) and (8) of section 102(b);

12 and

13 (2) paragraphs (4) and (5) of section 508(m) of

14 the Federal Crop Insurance Act (7 U.S.C. 1508(m))

15 (as amended by sections 205 and 206).

Æ