I
103D CONGRESS
2D SESSION
H. R. 4217
To reform the Federal crop insurance program, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 14, 1994
Mr. DE LA GARZA (for himself, Mr. JOHNSON of South Dakota, and Mr.
MINGE) (all by request) introduced the following bill; which was referred
to the Committee on Agriculture
A BILL
To reform the Federal crop insurance program, and for
other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Federal Crop Insur-
ance Reform Act of 1994’’.
SEC. 2. CROP INSURANCE AMENDMENTS.
(a) Section 505(a) of title V of the Agricultural Ad-
justment Act of 1938 (7 U.S.C. 1505) is amended—
(1) by striking ‘‘the’’ after ‘‘Federal crop insur-
ance program,’’ and inserting ‘‘one additional’’; and
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application. This administrative fee shall be waived
for limited resource farmers, as defined by the Cor-
poration, or if the producer elects to purchase addi-
tional protection at 65 percent or more of the re-
corded or appraised average yield and 100 percent
of the expected market price, or an equivalent cov-
erage, offered by approved crop insurance providers.
Funds collected as administrative fees shall be avail-
able, subject to appropriations, for salaries and ex-
penses.
‘‘(5) Participation in the catastrophic risk cov-
erage for any producer’s crop on any land in the
county requires participation for that producer’s
crop on all insurable land of the producer in the
county.
‘‘(6) To be eligible for any price support, pro-
duction adjustment, or conservation program admin-
istered by the United States Department of Agri-
culture for any crop, or for loans under any program
of the Farmers Home Administration or any succes-
sor agency, the producer must obtain at least the
catastrophic level of insurance for all crops of eco-
nomic significance grown on all farms in the county
in which the producer has an interest, if insurance
is available in the county for those crops. The term
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‘economic significance’ shall mean any crop that has
contributed, or is expected to contribute, 10 percent
or more of the total expected value of all crops
grown by the producer.
‘‘(7) The Board may limit insurance in any
county or area, or on any farm, on the basis of the
insurance risk involved.
‘‘(c) COVERAGE LEVELS GENERALLY.—
‘‘(1) The Corporation shall offer plans of insur-
ance providing levels of coverage greater than that
available under catastrophic risk protection. Produc-
ers may only purchase there other plans from ap-
proved private insurance providers, if such private
insurance is available. Nothing contained herein re-
stricts the Corporation from offering insurance if
coverage from private insurance providers is unavail-
able. If the producer has already applied for cata-
strophic risk protection at the United States Depart-
ment of Agriculture office and elects to purchase ad-
ditional coverage, the insurance file for that pro-
ducer shall be transferred to the approved private
insurance provider servicing the additional coverage
policy and the administrative fee for the crop for
which additional coverage at 65 percent or more of
the recorded or appraised average yield and 100 per-
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cent of the expected market price, or an equivalent
coverage, is obtained shall be refunded to the in-
sured.
‘‘(2) Producers shall have the option of pur-
chasing additional coverage based on either an indi-
vidual yield and loss basis or on an area yield and
loss basis when both options are offered by the Cor-
poration.
‘‘(3) The level of coverage shall be dollar de-
nominated and may be purchased at any level not to
exceed 85 percent of the individual yield or 95 per-
cent of the area yield, as determined by the Corpora-
tion.
‘‘(4) The Corporation shall establish a price
level for each commodity on which insurance is of-
fered that—
‘‘(A) shall not be less than the projected
market price for the commodity as determined
by the Corporation; or
‘‘(B) at the discretion of the Corporation,
may be based on the actual market price at the
time of harvest, as determined by the Corpora-
tion.
‘‘(5) Insurance coverage shall be made available
to the producer on the basis of any price election
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that equals or is less than that established by the
Board and the coverage shall be quoted in terms of
dollars per acre: Provided, That the Corporation
may establish minimum price elections below which
levels of insurance shall not be offered.
‘‘(6) For levels of coverage 65 percent or more
of the recorded or appraised average yield and 100
percent of the expected market price, or an equiva-
lent coverage, the producer may elect to delete from
the insurance coverage provided under this title cov-
erage against damage caused by fire and hail, pro-
vided an equivalent or greater dollar amount of cov-
erage for damage caused by fire and hail is obtained
from a private hail/fire insurance provider. Upon
written notice of such election to the company issu-
ing the policy providing coverage under this title and
submission of evidence of substitute coverage on the
commodity insured, the producer’s premium shall be
reduced by an amount determined by the Corpora-
tion to be actuarially appropriate, taking into ac-
count the actuarial value of the remaining coverage
provided by the Corporation. In no event shall the
producer be given credit for an amount of premium
determined to be greater than the actuarial value of
the protection against losses caused by fire and hail
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that is included in the coverage under this title for
the crop.
‘‘(7) The Board may enter into agreements
with any State or agency of a State under which
such State or agency may pay to the approved insur-
ance provider an additional premium subsidy to fur-
ther reduce the portion of the premium paid by
farmers in such State.
‘‘(8) The Board may limit or refuse insurance
in any county or area, or on any farm, on the basis
of the insurance risk involved.
‘‘(d) PREMIUMS.—
‘‘(1) The Corporation shall fix adequate pre-
miums for all its plans of insurance at such rates as
the Board deems actuarially sufficient to attain an
expected loss ratio of not greater than 1.1.
‘‘(A) For catastrophic risk protection cov-
erage, the amount of premium shall be suffi-
cient to cover anticipated losses and a reason-
able reserve.
‘‘(B) For levels of coverage below 65 per-
cent of the recorded or appraised average yield
and 100 percent of the expected market price,
or an equivalent coverage, but greater than cat-
astrophic risk protection, the amount of pre-
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mium shall be sufficient to cover anticipated
losses, a reasonable reserve, and an amount for
operating and administrative expenses, as deter-
mined by the Corporation, that is less than the
amount established for coverage at 65 percent
and 100 percent of the expected market price,
or an equivalent coverage.
‘‘(C) For levels of coverage of at least 65
percent of the recorded or appraised average
yield and 100 percent of the expected market
price, or an equivalent coverage, the amount of
premium shall be sufficient to cover anticipated
losses, a reasonable reserve, and an amount to
pay the operating and administrative expenses
as determined by the Corporation on an indus-
try-wide basis as a percent of the total pre-
mium.
‘‘(2) For the purpose of encouraging the broad-
est possible participation, the Corporation shall pay
a part of the premium equivalent to—
‘‘(A) for catastrophic risk protection cov-
erage, an amount equal to the premium estab-
lished in paragraph (1)(A) of this section;
‘‘(B) for levels of coverage below 65 per-
cent of the recorded or appraised average yield
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reductions shall be subject to the rules, limitations,
and procedures established by the Corporation.
‘‘(e) ELIGIBILITY.—To participate in catastrophic
risk protection coverage under this title, producers may
make application at the local United States Department
of Agriculture office or to an approved private crop insur-
ance provider. For all coverages, producers shall be re-
quired to—
‘‘(1) purchase crop insurance on or before the
sales closing date for the crop by providing the re-
quired information and executing the required docu-
ments. Such sales closing date shall be established
by the Corporation to maximize convenience to pro-
ducers in obtaining benefits under price and produc-
tion adjustment programs of the Department when-
ever feasible; however, the Corporation will establish
all sales closing dates to assure that the goal of ac-
tuarial soundness for the crop insurance program is
met;
‘‘(2) provide records, acceptable to the Corpora-
tion, of previous acreage and production or accept a
Corporation determined yield; and
‘‘(3) report acreage planted and prevented from
planting by the designated acreage reporting date
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for that crop and location as established by the Cor-
poration.
‘‘(f) YIELD DETERMINATIONS.—
‘‘(1) IN GENERAL.—The Corporation shall im-
plement crop insurance underwriting rules that en-
sure that yield coverage, as specified in subsection
(f)(2) of this section, is provided to all producers
participating in the Federal crop insurance program.
‘‘(2) YIELD COVERAGE PLANS.—
‘‘(A) ACTUAL PRODUCTION HISTORY.—
‘‘(i) This plan uses the producer’s ac-
tual production history for the 4 previous
consecutive crop years without penalty, up
to a production data base of 10 consecutive
years, subject to paragraph (ii), to deter-
mine yield coverage.
‘‘(ii) If the producer does not submit
adequate documentation of history for a
crop, the producer shall be assigned, as the
producer’s farm program yield, not less
than 65 percent of the transitional yield of
the producer (adjusted to reflect actual
production reflected in the records accept-
able to the Corporation for continuous
years), as specified in regulations issued by
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the Corporation based on production his-
tory requirements.
‘‘(B) AREA YIELD.—The Corporation may
offer a crop insurance plan based on an area
yield that allows an insured producer to qualify
for an indemnity if a loss has occurred in an
area, as specified by the Corporation, in which
the farm of the producer is located. Under an
area yield plan, an insured producer shall be al-
lowed to select the level of area production at
which an indemnity will be paid consistent with
the terms and conditions established by the
Corporation.
‘‘(C) COMMODITY-BY-COMMODITY BASIS.—
A producer may choose between either individ-
ual yield or area yield coverage, where available,
on a commodity-by-commodity basis.
‘‘(D) NOTICE.—The Corporation shall en-
sure that, whenever the yield coverage provi-
sions of this section are effective, producers are
given adequate notice of such provisions in ad-
vance of the crop insurance application period
for the crops to which such provisions first will
apply.’’;
(5) in subsection (g) (as redesignated)—
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(A) in paragraph (1), by striking ‘‘(a)’’
and inserting ‘‘(c)’’;
(B) by striking paragraph (2) and insert-
ing the following new paragraph:
‘‘(2) PREPARATION OF POLICIES.—A policy or
other material submitted to the Board under this
subsection may be prepared without regard to the
limitations contained in this title, including the re-
quirements concerning the levels of coverage and
rates and the requirement that a price level for each
commodity insured must equal the projected market
price for the commodity as established by the Board.
Such policy may only be subsidized at an amount
equivalent to coverage that is authorized under this
title.’’;
(C) in paragraph (3)—
(i) by striking ‘‘taking into consider-
ation the risks covered by the policy or
other material’’;
(ii) by inserting after ‘‘more than one
reinsurance agreement’’ the words ‘‘with
the private insurance provider’’; and
(iii) by striking title ‘‘V’’ and insert-
ing ‘‘title 5’’; and
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(D) by striking paragraph (4) and insert-
ing the following new paragraph:
‘‘(4) REQUIRED
PUBLICATION.—Any policies,
provisions of policies, and rates approved under this
subsection shall be published as a notice in the Fed-
eral Register and made available to all persons con-
tracting with or reinsured by the Corporation under
the same terms and conditions as between the Cor-
poration and the submitting person.’’;
(6) by striking subsection (i) (as redesignated)
and inserting the following new subsection:
‘‘(i) CLAIMS FOR LOSSES.—The Corporation may
provide for adjustment and payment of claims for losses
as provided under subsection (a) of this section under
rules prescribed by the Board. The rules prescribed by the
Board shall establish standards to ensure that all claims
for losses are adjusted, to the extent practicable, in a uni-
form and timely manner. If any claim for indemnity is
denied by the Corporation, an action on such claim may
be brought against the Corporation and the insurance pro-
vider in the United States district court for the district
in which the insured farm is located: Provided, That no
suit on such claim may be allowed under this section un-
less it shall have been brought within one year after the
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date when written notice of denial of the claim is provided
to the claimant.’’;
(7) by striking subsection (j) (as redesignated)
and inserting the following new subsection:
‘‘(j) REINSURANCE.—Notwithstanding any other pro-
vision of this title, the Corporation is directed, to the maxi-
mum extent practicable, to provide reinsurance upon such
terms and conditions as the Board may determine to be
consistent with subsections (b) and (c) of this section and
sound reinsurance principles to insurers, as defined by the
Corporation, that insure producers of any agricultural
commodity under a plan or plans acceptable to the Cor-
poration. The Corporation’s reinsurance agreements with
the reinsured companies shall require the reinsured com-
panies to bear a sufficient share of any potential loss
under such agreement so as to ensure that the reinsured
company will sell and service policies of insurance in a
sound and prudent manner, taking into consideration the
availability of private reinsurance.’’;
(8) in subsection (k) (as redesignated), by strik-
ing ‘‘provide’’ after ‘‘The Corporation may’’ and in-
serting ‘‘offer plans of’’; and
(9) by striking subsection (n) (as redesignated)
and inserting the following new subsection: