To amend the Federal Crop Insurance Act to require the Federal Crop Insurance Corporation to offer farmers supplemental crop insurance based on an area yield and loss plan of insurance, and for other purposes.

SECTION 1. REQUIREMENT TO OFFER FARMERS SUPPLEMENTAL CROP INSURANCE 
              BASED ON AN AREA YIELD AND LOSS PLAN OF INSURANCE.

    (a) In General.--Section 508(c) of the Federal Crop Insurance Act 
(7 U.S.C. 1508(c)) is amended by adding at the end the following new 
paragraph:
            ``(11) Supplemental area coverage.--
                    ``(A) Authority to offer coverage.--Notwithstanding 
                paragraph (4), if area coverage is available in an area 
                (as determined by the Corporation under paragraph (3)), 
                the Corporation may provide producers in that area 
                described in subparagraph (B) with the option to 
                purchase supplemental insurance coverage based on an 
                area yield and loss plan of insurance.
                    ``(B) Eligible producers.--To be eligible to obtain 
                supplemental coverage under this paragraph, a producer 
                must purchase either an individual yield and loss plan 
                of insurance or a revenue plan of insurance that 
                includes coverage for a loss in yield at an additional 
                coverage level for the same crop to be covered by the 
                supplemental coverage.
                    ``(C) Limitation.--In providing supplemental 
                coverage to a producer under this paragraph, the sum of 
                the following shall not exceed 100 percent:
                            ``(i) The coverage level expressed in 
                        percentage terms for the individual yield and 
                        loss plan of insurance or the revenue plan of 
                        insurance that includes coverage for a loss in 
                        yield that is purchased by the producer for the 
                        same crop covered by the supplemental coverage, 
                        as required by subparagraph (B).
                            ``(ii) The share expressed in percentage 
                        terms of the area yield and loss plan of 
                        insurance (at whatever coverage level is 
                        selected) that is used to determine the level 
                        of supplemental insurance coverage provided the 
                        producer under this paragraph.
                    ``(D) Payment of portion of premium.--As provided 
                in subsection (e), the Corporation shall pay a portion 
                of the premium under a supplemental area yield and loss 
                plan of insurance provided under this paragraph and the 
                associated individual area yield and loss plan of 
                insurance or revenue plan of insurance that includes 
                coverage for a loss in yield.
                    ``(E) Amount of indemnity paid under supplemental 
                coverage.--The indemnity payable under supplemental 
                coverage provided under this paragraph shall be 
                calculated as--
                            ``(i) the total indemnity for an area yield 
                        and loss plan of insurance at the coverage 
                        level chosen by the producer; multiplied by
                            ``(ii) the share of the coverage of the 
                        area yield and loss plan of insurance selected 
                        by the producer.
                    ``(F) Special rule relating to qualifying losses.--
                In the case of a qualifying loss in an area (as 
                determined by the Corporation) under a supplemental 
                area yield and loss plan of insurance, subject to the 
                applicable coverage limits, the total amount of the 
                indemnity shall be available to the producer regardless 
                of the loss incurred under the individual yield and 
                loss plan of insurance or the revenue plan of insurance 
                that includes coverage for a loss in yield of the 
                producer.
                    ``(G) Reinsurance year.--Subject to availability of 
                area coverage for the insurable crop in the area (as 
                determined by the Corporation), the supplemental plan 
                of insurance described in this paragraph shall be made 
                available by the Corporation not later than the 2006 
                reinsurance year.''.
    (b) Conforming Amendments.--Section 508(d)(2) of the Federal Crop 
Insurance Act (7 U.S.C. 1508(d)(2)) is amended--
            (1) by striking ``additional coverage'' in the matter 
        preceding subparagraph (A) and inserting ``additional and 
        supplemental coverages''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) In the case of supplemental area coverage 
                provided under subsection (c)(11) that, in combination 
                with either the individual yield and loss coverage, or 
                a comparable coverage for a policy or plan of insurance 
                that is not based on individual yield and does not 
                insure more than 100 percent of the recorded or 
                appraised average yield indemnified at not greater than 
                100 percent of the expected market price, the amount of 
                the premium shall--
                            ``(i) be sufficient to cover anticipated 
                        losses and a reasonable reserve; and
                            ``(ii) include an amount for operating and 
                        administrative expenses, as determined by the 
                        Corporation, on an industry-wide basis as a 
                        percentage of the amount of the premium used to 
                        define loss ratio.''.

Summary: Amends the Federal Crop Insurance Act to require offering farmers supplemental crop insurance based on an area yield and loss plan of insurance.