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[United States Department of Agriculture Letterhead]
EXHIBIT 10.27(5)
April 11, 1996
VIA FAX - (515) 276-8305
CERTIFIED MAIL - RETURN RECEIPT NO. Z 068 846 528
Mr. Dennis G. Daggett
Executive Vice President
IGF Insurance Company
2882 106th Street
Des Moines, IA 50322
RE: 1996 Standard Reinsurance Agreement - Approval
Dear Mr. Daggett:
The Federal Crop Insurance Corporation (FCIC) has completed its review
and evaluation of the 1996 Standard Reinsurance Agreement (Agreement) and Plan
of Operation (Plan) initially received on June 15, 1995, with revisions
received on August 31, and December 5, 1995, from IGF Insurance Company (IGF).
This review and evaluation was completed based on the requirements outlined in
the 1995 Agreement, Amendments, Plan, FCIC's Manual 14, and the Standards for
Approval contained in 7 CFR 400, Subpart L, as amended (Federal Register 57
34665, August 6, 1992). According to our analysis of the Plan, IGF meets the
financial requirements and possesses adequate surplus to cover IGF's requested
maximum reinsurable premium volume of $82,560,000.
Based on IGF's 1995 Annual Statement, IGF is authorized to write up to
$82,560,000 in requested reinsurable premium volume. IGF may not write any
reinsurable premium volume above this amount unless approval is obtained in
advance from FCIC. If you fail to obtain FCIC approval, any amount exceeding
the maximum reinsurable premium volume authorized may not be included under the
terms and conditions of the 1996 Agreement.
IGF's 1996 Escrow Agreement and Escrow Agreement are approved. The
Agreement Regarding Reinsurance Escrow Agreement (Arrangement), Exhibit 27 of
the Plan, states that the Company agrees to submit on a monthly basis, a
certified accurate report of reconciliation (reconciliation) of the Loss
Account and the Escrow Account. The reconciliation must be submitted to FCIC
within 20 business days of the cutoff date of the Bank Statements and is in
addition to the monthly reports required by the Agreement. If the
reconciliation is not received within 20 business days as required by the
Arrangement, FCIC will suspend funding of the Escrow Account until the
reconciliation is received.
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Mr. Dennis G. Daggett 2
If IGF intends to submit Private Sector Supplemental or Private Sector
Alternative policies for FCIC review and approval, it must do so in accordance
with Section V.E.2. of the Agreement and as directed in FCIC's Submission
Standards Handbook. If a Private Sector Supplemental or Private Sector
Alternative policy not approved by FCIC is attached to a FCIC-approved group
risk plan (GRP) or multiple peril crop insurance (MPCI) policy, the
FCIC-approved GRP or MPCI policy to which it is attached will not be reinsured
by FCIC.
IGF has complied with our request for corrections and revisions to the
1996 Agreement and Plan. The Agreement and Plan are approved. We appreciate you
cooperating with us to finalize and approve IGF's 1996 Agreement and Plan. A
copy of the 1996 Agreement and Plan is enclosed. If we can be of additional
assistance, please do not hesitate to contact your Account Executive, James
Jackson, at (202) 690-2092.
Sincerely,
E. Heyward Baker
E. Heyward Baker
Chief
Reinsurance Services Liaison Branch
Enclosures
cc: Mr. Robert Parkerson (cover letter only)
President
National Crop Insurance Services
7301 College Boulevard, Suite 170
Overland Park, Kansas 66210
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STANDARD REINSURANCE AGREEMENT
(July 1, 1994)
between the
FEDERAL CROP INSURANCE CORPORATION
and
IGF INSURANCE COMPANY
---------------------------------
(Insurance Company Name)
DES MOINES, IOWA
---------------------------------
(City and State)
This Standard Reinsurance Agreement, including the Appendixes, all referenced
documents and Federal Crop Insurance Corporation ("FCIC") Manual 13 and Manual
14 in effect at the start of the reinsurance year ("Agreement"), establishes
the terms and conditions under which the FCIC will provide premium subsidy,
expense reimbursement, and reinsurance on multiple peril crop insurance
policies sold or reinsured by the above named Insurance Company (the
"Company"). This Agreement is authorized by the Federal Crop Insurance Act, as
amended (7 U.S.C. 1501 et seq.) (the "Act"), and regulations promulgated
thereunder which are codified in title 7, chapter IV of the Code of Federal
Regulations (C.F.R.). Such regulations are incorporated into this Agreement by
reference. The provisions of this Agreement which are inconsistent with
provisions of state or local law or regulation will supersede such law or
regulation to the extent of the inconsistency. This is a cooperative financial
assistance agreement between the FCIC and the Company to deliver multiple peril
crop insurance under the authority of the Act. For the purposes of this
Agreement, use of the plural form of a word includes the singular and use of
the singular form of a word includes the plural unless the context indicates
otherwise.
SECTION I. DEFINITIONS
A. "Actuarial Data Master File" means the hard copy and electronic data
processing (EDP) compatible information distributed by FCIC which
contains premium rates, program dates, and related information
concerning the crop insurance program for a crop year.
B. "Annual settlement" means the preliminary settlement of accounts
between the Company and FCIC for the reinsurance year pursuant to Manual
13.
C. "Billing date" means the date specified in the Actuarial Data Master
File as the date on which FCIC provides that policyholders should be
invoiced for premium due on eligible crop insurance contracts.
D. "Book of business" means the aggregation of all eligible crop insurance
contracts in force between the Company and its policyholders which have
a sales closing date within the reinsurance year reinsured under this
Agreement.
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E. "Cancellation date" means the date by which the Company or policyholder
must notify the other that coverage under an eligible crop insurance
contract issued by the Company is cancelled for a succeeding crop year.
The day following this date is considered as the date an eligible crop
insurance contract carried over from the previous crop year is renewed
for the subsequent crop year.
F. "Carry-over crop insurance contract" means an eligible crop insurance
contract which has been in force for one policy term and which continues
in force for another policy term after the cancellation date.
G. "Company payment date" means the last business day of the month.
H. "Crop insurance contract" means a policy, provision, or endorsement, or
like instrument, and associated documents issued by the Company and held
by the policyholder to insure the interest of the policyholder in a
single crop.
I. "Eligible crop insurance contract" means a crop insurance contract
which is sold and serviced in a manner consistent with the Act, 7 C.F.R.
chapter IV., FCIC policy and procedure, and applicable rates, terms, and
special limitations; having a sales closing date within the reinsurance
year; to a person eligible to receive crop insurance protection; for a
crop and in areas approved by FCIC; and on forms that have been
approved by FCIC.
J. "Eligible producer" means a person who is determined to be in compliance
with the Food Security Act of 1985, and the regulations promulgated
thereunder, the Food, Agriculture, Conservation, and Trade Act of 1990,
and the regulations promulgated thereunder, and 7 C.F.R. chapter IV.
K. "FCIC payment date" means the first banking day following the fourteenth
calendar day after FCIC receives the accounting report and supporting
data upon which any payment is based.
L. "Group risk plan" means crop insurance coverage based on a county crop
yield experience rather than on individual yield history. Indemnities
are paid based on county yields rather than on individual yields during
a crop year.
M. "Ineligible crop insurance contract" means any crop insurance contract
determined by FCIC in accordance with its regulations to be ineligible
for reinsurance under this Agreement.
N. "Insurable interest" means the portion of an insured crop an insured has
at risk in the event of an insurable loss.
O. "Local agency" means the office in which the business of selling and
servicing eligible crop insurance contracts to the general public is
conducted.
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P. "Loss ratio" means the ratio of ultimate net loss to net book premium,
expressed as a percentage. For example, the ratio of one dollar ultimate net
loss to one dollar net book premium would be expressed as one hundred
percent (100%).
Q. "Multiple peril or Multi-peril Crop Insurance (MPCI)" means an eligible crop
insurance contract that provides coverage based on individual producer crop
yield experience or crop yield experience applicable to an individual farm
against more than one cause of loss set out in the contract and reinsured
under the Agreement.
R. "Net book premium" means total premium payable by the policyholder plus the
FCIC premium subsidy, less cancellations and adjustments.
S. "Person" means any individual or legal entity.
T. "Policyholder" means the person identified on an eligible crop insurance
contract issued by the Company subject to this Agreement.
U. "Producer premium" means that portion of the FCIC-approved insurance premium
that the policyholder must pay.
V. "Reinsurance account" means an account maintained by FCIC within the
Reinsurance Accounting System by which certain underwriting gains are
distributed.
W. "Reinsurance year" means the period from July 1 of any year through June 30
of the following year and identified by reference to the following year.
X. "Renewed crop insurance contract" (see Carry-over crop insurance contract).
Y. "Retained" as applied to ultimate net losses, net book premium, or book for
business, means remaining liability for ultimate net losses and the right
to associated net book premiums after all reinsurance cessions under this
Agreement.
Z. "Sales closing date" means the date approved by FCIC as the last date on
which a producer may apply for an eligible crop insurance contract on a
crop in a specific county. All terms and conditions of the insurance
contract other than those which must be established by the Contract Change
Date, must be established by this date.
AA. "Sales Supervisor" means any person who either supervises, coordinates, or
facilitates the activities of sales agents, local competing agencies or
local sales agents on behalf of the Company, whether as an employee, or a
contractor, and whose compensation is in whole or in part calculated as a
percentage of the gross premiums written.
AB. "Standards for Approval" means the minimum requirements the Company must
meet in order to be eligible to obtain this Agreement. Standards for
Approval are codified in 7 C.F.R. part 400, subpart L.
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AC. "Transaction Cut-off Date" for weekly data reporting is 11:59 PM central
time on Saturday of each week. The transaction cut-off date for Monthly
Summary Reports is 11:59 PM central time on the Saturday occurring
within the first full week of the month.
AD. "Ultimate net loss" means the amount paid by the Company under any
eligible crop insurance contract reinsured under this Agreement in
settlement of any claim and in satisfaction of any judgement rendered on
account of such claim, less any recovery or salvage by the Company.
"Ultimate net loss" may include interest and policyholder's court costs
related to the eligible crop insurance contract provisions or procedures
which are contained in a final judgement against the Company by a court
of competent jurisdiction if FCIC determines: (1) that such interest or
court costs resulted from the Company's substantial compliance with FCIC
procedures or instructions in the handling of the claim or in the
servicing of the insured; or (2) that the actions of the Company were in
accordance with accepted loss adjustment procedures; and (3) that the
award of such interest or court costs did not involve negligence or
culpability on the part of the Company. "Ultimate net loss" may also
include interest or policyholder's court costs related to the crop
insurance provisions or procedures which are included in the settlement
of any claim if FCIC, in addition to the determinations included above,
is advised of the terms of and the basis for the settlement and
determines that the settlement should be approved. Under no
circumstances are any punitive or consequential damages included in the
calculation of ultimate net loss.
AE. "Underwriting gain" means the amount by which retained net book premium
exceeds retained ultimate net losses.
AF. "Underwriting loss" means the amount by which retained ultimate net
losses exceed retained net book premium.
SECTION II. REINSURANCE
A. General Terms
1. The Company is required to make crop insurance available to all
eligible producers for the crops and in the areas which are
stated in its Plan of Operation as approved by FCIC. Only
eligible crop insurance contracts written under the authority of
the Act will be reinsured under this Agreement.
2. In exchange for the reinsurance premiums provided by the Company
in accordance with this Agreement, FCIC will provide the Company
with reinsurance pursuant to the provisions of this Agreement.
3. All crop Insurance contracts reinsured under this Agreement must
contain the following statement:
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This insurance policy is reinsured by the Federal Crop
Insurance Corporation under the provisions of the
Federal Crop Insurance Act, as amended (the "Act") (7
U.S.C. 1501 et seq.), and all terms of the policy and
rights and responsibilities of the parties are
specifically subject to the Act and the regulations
under the Act codified in chapter IV of title 7 of the
Code of Federal Regulations.
4. FCIC will not provide reinsurance, expense reimbursement, or
premium subsidy for any crop insurance contract which is not
eligible or which is sold or serviced in violation of the terms
of this Agreement. Ineligible crop insurance contracts will
include those sold or renewed after the date a person is placed
upon a list of ineligible persons maintained and provided by
FCIC periodically or who the Company has reason to know is
otherwise ineligible. Any application for crop insurance from
any person who is not identified on such listing of ineligible
persons, which the Company refuses to accept, must be
immediately referred to FCIC.
5. No portion of any payment made to the Company under this
Agreement may be rebated in any form to policyholders. Neither
the Company nor its agents shall assess service fees or
additional charges on eligible crop insurance contracts
reinsured under this Agreement.
6. The Company, in accordance with its Plan of Operation, may
designate eligible crop insurance contracts to one of three
funds for each reinsurance year: 1) Commercial Fund, 2)
Developmental Fund, and 3) Assigned Risk Fund.
B. Reinsurance Funds
1. Assigned Risk Fund
a. Within each individual state, the Company may designate
eligible crop insurance contracts which have an
aggregate net book premium not greater than the maximum
cession to the Assigned Risk Fund for that state as
published by FCIC in Appendix 2, Exhibit 15 to the Plan
of Operation. FCIC will assume eighty percent (80%) of
the liability for ultimate net losses on these
designated eligible crop insurance contracts in exchange
for eighty percent (80%) of the associated net book
premium except as provided in paragraphs II.B.1.c. and
II.B.4. The Company must retain twenty percent (20%) of
the net book premium and associated liability for
ultimate net losses on these designated eligible crop
insurance contracts except as provided in paragraphs
II.B.1.c. and II.B.4.
b. The Company must designate eligible crop insurance
contracts to the Assigned Risk Fund not later than the
transaction cut-off date for the week including the 30th
calendar day after the sales closing date for the
eligible crop insurance contract.
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c. In the event the aggregate net book premium for all such
eligible crop insurance contracts exceeds the maximum cession
allowed for an individual state, the amount ceded for each
eligible crop insurance contract in such state will be reduced
pro-rata to the maximum cession for that state. The net book
premium and associated liability for ultimate net losses which
exceeds the maximum cession for an individual state will be
placed in the Developmental Fund.
d. Eligible group risk plan crop insurance contracts which are
included in the Company's book of business for the 1995 crop
year under this Agreement may be designated to the Assigned
Risk Fund in excess of the Company's maximum cession permitted
under paragraph II.B.1.a.
2. Developmental Fund
a. The Company may designate net book premium and associated
liability for ultimate net losses to the Developmental Fund.
Such designation must be made in its Plan of Operation for
each reinsurance year.
b. Designations to the Developmental Fund may be made by crop or
by county, but not by both within a state. If designations are
by county, all eligible crop insurance contracts for all crops
in that county will be included. If designations are by crop,
all eligible crop insurance contracts for that crop in that
state will be included.
c. Eligible crop insurance contracts designated to the Assigned
Risk Fund will not be included in any designations to the
Developmental Fund except to the extent required by
paragraph II.B.1.c.
d. The Company must retain at least thirty-five percent (35%) of
the net book premium and associated liability for ultimate net
losses on eligible crop insurance contracts placed into the
Developmental Fund within each state. The Company may retain a
greater percentage of the net book premium and associated
liability for ultimate net losses within each state whenever it
designates a percentage greater than thirty-five percent (35%)
in its Plan of Operation for any reinsurance year. Such
percentage designations must be in five percent (5%)
increments. FCIC will assume the liability for ultimate net
losses not retained by the Company within each state in
exchange for any equal percentage of the associated net book
premium included in the Developmental Fund in that state.
3. Commercial Fund
a. Any eligible crop insurance contract reinsured under this
Agreement not included in designations to the Assigned Risk
Fund or the Developmental Fund will be included in the
Commercial Fund.
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b. The Company must retain at least fifty percent (50%) of
the net book premium and associated liability for
ultimate net losses on eligible crop insurance contracts
designated to the Commercial Fund within each state. The
Company may retain a greater percentage of the net book
premiums and associated liability for ultimate net
losses within each state whenever it designates a
percentage greater than fifty percent (50%) in its Plan
of Operation for any reinsurance year. Such percentage
designations must be made in five percent (5%)
increments. FCIC will assume the liability for ultimate
net losses not retained by the Company within each state
in exchange for an equal percentage of the associated
net book premiums included in the Commercial Fund in
that state.
4. Company Minimum Retention
a. After all proportional reinsurance cessions under this
Agreement, the Company must retain a percentage of net
book premiums and associated liability for ultimate net
losses that equals or exceeds thirty-five percent (35%)
of its net book of business, or twenty-two and one-half
percent (22.5%) of its net book of business if more than
fifty percent (50%) of the Company's net book of
business is in the Assigned Risk Fund.
b. In the event the Company fails to retain the required
minimum percentage of its book of business, the percent
of net book premiums and associated liability for
ultimate net losses retained for all eligible crop
insurance contracts included in the Assigned Risk Fund
in all states will be increased on a pro-rata basis from
the twenty percent (20%) retention stated in paragraph
II.B.1.a. to the retention necessary to meet the minimum
retention stated in paragraph II.B.4.a.
C. Ultimate Net Losses
1. Company's Responsibility for Ultimate Net Losses
The non-proportional reinsurance provided hereunder applies to
the Company's retained book of business in each individual Fund
and state after proportional cessions under subsection II.B. For
each Fund and state, the Company will retain ultimate net losses
as follows:
a. The Company will pay the following percentages of the
amount by which its retained ultimate net losses in each
individual state and Fund exceed one hundred percent
(100%) but are less than or equal to one hundred sixty
percent (160%) of the Company's retained net book
premium in that state and Fund for the reinsurance year.
i. Commercial Fund 30.0%
ii. Developmental Fund 14.0%
iii. Assigned Risk Fund 5.0%
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b. In addition to the amount determined under paragraph
II.C.1.a., the Company will pay the following
percentages of the amount by which it's retained
ultimate net losses in each individual state and Fund
exceed one hundred sixty percent (160%) but are less
than or equal to two hundred twenty percent (220%) of
the Company's retained net book premium in that state
and Fund for the reinsurance year.
i. Commercial Fund 25.0%
ii. Developmental Fund 10.0%
iii. Assigned Risk Fund 3.0%
c. In addition to the amounts determined under paragraphs
II.C.1.a. and b., the Company will pay the following
percentages of the amount by which it's retained
ultimate net losses in each individual state and Fund
exceed two hundred twenty percent (220%) but are less
than or equal to five hundred percent (500%) of the
Company's retained net book premium in that state and
Fund for the reinsurance year.
i. Commercial Fund 15.0%
ii. Developmental Fund 7.0%
iii. Assigned Risk Fund 2.0%
d. FCIC will assume ultimate net losses in excess of the
Company's retained ultimate losses as determined under
paragraphs II.C.1.a., b. and c. In addition, FCIC will
pay one hundred percent (100%) of the amount by which
the Company's retained ultimate net losses in each
individual state and Fund exceed five hundred percent
(500%) of the Company's retained net book premium in
that state and Fund for the reinsurance year.
D. Company's Retention of Underwriting Gain
1. The amount of underwriting gain retained by the Company will be
calculated separately for each Fund within each state as
follows:
a. When the loss ratio equals or exceeds sixty-five
percent (65%) but is less than one hundred percent
(100%) of the Company's retained net book premium in a
Fund and state for the reinsurance year, the Company
will retain the following percentages of the
underwriting gain:
i. Commercial Fund 94.0%
ii. Developmental Fund 45.0%
iii. Assigned Risk Fund 15.0%
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b. In addition to the amount of underwriting gain determined in the range
of loss ratios under paragraph II.D.1.a., when the loss ratio equals or
exceeds fifty-five percent (55%) but is less than sixty-five percent
(65%) of the Company's retained net book premium in a Fund and state for
the reinsurance year, the Company will retain in that Fund and state the
following percentages of the underwriting gain:
i. Commercial Fund 65.0%
ii. Developmental Fund 30.0%
iii. Assigned Risk Fund 9.0%
c. In addition to the amounts of underwriting gains determined in the range
of loss ratios under paragraphs II.D.1.a. and b., when the loss ratio
is less than fifty-five percent (55%) of the Company's retained net book
premium in a Fund and state for the reinsurance year, the Company will
retain in that Fund and state the following percentages of the
underwriting gain:
i. Commercial Fund 11.0%
ii. Developmental Fund 6.0%
iii. Assigned Risk Fund 2.0%
2. The retained underwriting gain or loss for each individual Fund is totalled
for each state to determine the gain or loss for that state.
3. The Company's overall gain or loss is determined by totalling the retained
underwriting gains or losses for all states. Any net underwriting gain will
be paid by FCIC to the Company at annual settlement except as provided in
paragraph II.D.4. Any net underwriting loss of the Company will be paid to
FCIC by the Company with each Monthly Summary Report.
4. Reinsurance Account (Applicable to 1992 and subsequent reinsurance years)
a. All calculations described in this section pertain only to annual
settlement, unless otherwise approved by FCIC. The Company's balance in
the Company's reinsurance account is subject to the provisions of
subsection V.S.
b. Whenever the Company's retained underwriting gain for all states in any
reinsurance year exceeds fifteen percent (15%) of its total retained net
book premium, the excess gain will be held in a Company reinsurance
account by FCIC.
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c. Whenever the Company retains an underwriting loss or an
underwriting gain that is less than fifteen percent
(15%) of its total retained net book premium in any
reinsurance year, FCIC will pay to the Company from the
Company's reinsurance account the difference between the
amount equal to fifteen percent (15%) of its total
retained net book premium for the same reinsurance year
and the amount of the Company's actual underwriting gain
or underwriting loss for that same reinsurance year, not
to exceed the balance in the Company's reinsurance
account.
d. FCIC will not pay in any reinsurance year an amount
greater than the balance available in the reinsurance
account. Negative balances in the Company reinsurance
account will not be carried over to a subsequent
reinsurance year.
e. Following the distribution permitted in paragraph
II.D.4.c., whenever the Company's retained underwriting
gain for the three (3) most recent reinsurance years
exceeds thirty percent (30%) of its average retained net
book premium for those same three (3) reinsurance years,
FCIC will pay to the Company from the Company's
reinsurance account any amount which exceeds thirty
percent (30%) of its average retained net book premium.
f. In the event this Agreement is terminated, any balance
in the reinsurance account will be paid as follows:
i. Whenever the Company terminates this Agreement,
any remaining balance in said account will be
paid to the Company by FCIC in two (2) equal
annual installments. The first installment will
be paid one year after the final Annual
Settlement of the last reinsurance year. The
second installment will be paid one year after
the first installment is paid. The Company must
cease reinsurance with the FCIC for at least one
(1) reinsurance year to be eligible for these
payments.
ii. Whenever FCIC terminates this Agreement, if may,
at its option, elect to pay any remaining
balance as described in paragraph II.D.4.f.(i)
above, or its may elect to transfer such balance
in said account to any subsequent Agreement it
may offer.
E. Commercial Reinsurance
The Company may reinsure commercially its liability for ultimate net
losses remaining after all cessions under this Agreement. The Company
must describe in the Plan of Operation its commercial reinsurance plan
and provide the necessary documentation as determined by FCIC to assure
that the potential liability for premiums retained under such commercial
reinsurance meets the requirements contained in 7 C.F.R. part 400 -
subpart L.
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Section III. FCIC PREMIUM SUBSIDY
A portion of the premiums for crop insurance provided under this
Agreement will be subsidized by FCIC in accordance with the provisions
of the Act. Such premium subsidy will be credited against net book
premium on the accounting report which accompanies the annual
settlement.
Section IV. Expense Reimbursement
A. General
In accordance with provisions of the Act, FCIC agrees to pay the Company
an amount equal to thirty-one percent (31%) of the net book premium for
all eligible multiple peril crop insurance contracts included under this
Agreement except as this amount may be reduced by subsections IV.C. and
IV.D.4. and 5., or as may be increased by subsection IV.B., and except
for group risk plan policies. FCIC agrees to pay the Company an expense
reimbursement of twenty-seven percent (27.0%) for all eligible group
risk plan crop insurance contracts.
B. Reimbursement for Excess Loss Adjustment Expense
In addition to the expense reimbursement in subsection IV.A., if the
loss ratio on the Company's total book of business in any individual
Fund in a state for the reinsurance year is in excess of one-hundred
twenty-five percent (125%), FCIC will pay to the Company two hundredths
of one percent (.02%) of the net book premium on all eligible multiple
peril crop insurance contracts reinsured under this Agreement for that
individual Fund in a state, for each full point in excess of the
one-hundred twenty-five percent (125%) loss ratio. The excess loss
adjustment expense reimbursement under this section will not exceed four
percent (4%) of the net book premium in any individual Fund in a state
for all eligible multiple peril crop insurance contracts reinsured under
this Agreement. Group risk plan crop insurance contracts are
specifically excluded from this computation.
C. Adjustments to Expense Reimbursement
The expense reimbursement may be adjusted to a level that FCIC
determines to be equitable if issuing or servicing an eligible crop
insurance contract or group of such contracts involve expenses that vary
significantly from the basis used to determine the expense reimbursement
provided under this section.
D. Payment of Expense Reimbursement
1. The expense reimbursement provided in subsection IV.A. will be
paid to the Company in two installments. The first installment,
equal to twenty-two percent (22%) of the net book premium for
all eligible crop insurance contracts unless such amount is
reduced by paragraph IV.D.4. or 5., will be included in the
Monthly Summary Report containing the data obtained from
accepted acreage reports
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(preliminary tonnage report for eligible raisin crop insurance
contracts). The second installment, equal to nine (9%) of net book
premium for all eligible multiple peril crop insurance contracts and
five percent (5.0%) of the net book premium for all eligible group risk
plan crop insurance contracts, unless such amount is reduced by
paragraph IV.D.5., will be included in the Monthly Summary Report on
which the Company reports the producer premium.
2. Excess loss adjustment expenses payable under subsection IV.B. will be
included in the Monthly Summary Report which reports losses exceeding
the thresholds specified therein.
3. The Company may, not sooner than the September Monthly Summary Report,
submit to FCIC estimated reports of raisin tonnage. These reports must
not exceed two (2) tons per acre. These reports will be used to
determine the first installment of the expense reimbursement for raisin
insurance. In the event the raisin premium is less than this estimate,
the Company will include the excess expense reimbursement as an amount
owed to FCIC in the first Monthly Summary Report after the actual raisin
tonnage is known. Interest on this amount at a rate of fifteen percent
(15%) simple interest per annum calculated from the date of payment by
FCIC to the date of the Monthly Summary Report upon which the actual
tonnage is reported must be included as an amount owed to FCIC.
4. With the exception of raisins, the Company must not submit estimated
data for the purpose of establishing the amount of expense reimbursement
due the Company.
5. All data on which liabilities and premiums are based must be reported by
the Company to and accepted by FCIC not later than the transaction
cut-off date for the tenth (10th) full week after the week which
includes the date the acreage report is due from the policyholder as
specified in the Actuarial Data Master File. The first installment of
the expense reimbursement for eligible crop insurance contracts
reinsured under this Agreement will be reduced if the data is delayed as
follows:
DATA RECEIVED FOR TRANSACTION CUT-OFF DATES FOR:
Weeks After Acreage Report Due Week Expense Reimbursement
----------------------------------- ---------------------
11th through 12th Weeks 20.5%
13th through 14th Weeks 19.0%
15th through 17th Weeks 17.5%
6. Expense reimbursement will not be paid on any eligible crop insurance
contract reinsured under this Agreement for which acreage report data is
received after the transaction cut-off date for the 17th week after the
acreage report due week.
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SECTION V. GENERAL PROVISIONS
A. Collection of Information and Data
1. The Company is required to collect and provide to FCIC the Social
Security Account Number (SSN) or the Employer Identification Number
(EIN) as authorized by the Food, Agriculture, Conservation, and
Trade Act of 1990 (1990 Farm Act) (Pub. I. 101-624), and the
regulations promulgated thereunder which are codified in 7 C.F.R.
part 400, subpart Q.
2. The Company is required to collect program participation data by race,
sex, age, and disability from all policyholders, on the form and in the
manner prescribed by FCIC. Title VI of the Civil Rights Act of 1964, and
the regulations of the Department of Justice and of the Department of
Agriculture, require collection of such data to ensure crop insurance
program benefits are made available to all eligible persons regardless
of race, color, religion, sex, age, disability, or national origin.
B. Reports
1. The Company must submit accurate and detailed contract data to FCIC in
accordance with the requirements of Manual 13 which are in effect on
July 1 of the reinsurance year.
2. All reports submitted for reimbursement must be certified by an
authorized officer or authorized employee of the Company. The required
certification statements are contained in Manual 13.
3. In addition to the reporting requirements contained in Manual 13, the
Company will provide to FCIC any other information relating to its crop
insurance activities as may be requested by FCIC.
4. Failure of the Company to comply with the provisions of this Agreement,
including timely submission of the monthly and annual data and reports,
or any other report required by this Agreement does not excuse or delay
the requirement to pay any amount due to FCIC by the dates specified
herein. Failure of the Company to make payment in accordance with the
provisions of this Agreement is a default of this Agreement by the
Company. In addition to the payment of applicable interest, such actions
may be a basis to suspend or terminate this Agreement.
5. Producer premiums collected by the Company must be reported on the
Monthly Summary Report submitted during the next calendar month.
Producer premiums which are uncollected for each billing date must be
reported by the Company on the Monthly Summary Report for the month
following the month of the billing date.
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6. All payments due FCIC will be netted on the Monthly and Annual
Summary Reports with amounts due the Company from FCIC. Any
amount due FCIC as a result of the netting affect, must be
deposited on or before the Company's payment date directly into
the Corporation's account in the U.S. Treasury by Electronic
Funds Transfer (EFT). FCIC will remit amounts due the Company by
EFT.
7. All payments and reports are subject to post audit by FCIC.
C. Interest
1. FCIC will pay interest to the Company in accordance with the
interest provisions of the Contract Disputes Act (41 U.S.C. 601
et seq).
2. The Company will pay FCIC interest on payments not timely
received in accordance to the terms of this Agreement at the
simple interest rate of fifteen percent (15%) per annum.
3. The Company will repay, with interest, any amount paid to the
Company by FCIC which FCIC or the Company subsequently
determines not due. Such interest will be calculated in
accordance with Manual 13 at the interest rate contained in
paragraph V.C.2.
D. Escrow Account
1. At the Company's request, FCIC will establish an escrow account
at a bank designated by the Company, and approved by FCIC, to
reimburse the Company for payment of indemnities by the Company.
The Company's bank must pledge collateral as required by 31
C.F.R. section 202 in the amount determined by FCIC. The
requirements for funding the escrow account and monthly
balancing are described in Manual 13 and the Escrow Agreement.
2. Any Company that elects not to utilize Escrow Funding will be
reimbursed for paid losses validated and accepted on the Monthly
Summary Report.
3. For the purpose of this Agreement, any loss will be considered
paid by the Company when the instrument or document issued as
payment has cleared the Company's bank account.
E. Policy and Form Approval
1. The Company must submit for FCIC's approval all multiple peril
contracts of insurance, crop policies, amendments, forms, and
procedures incorporated by reference into the eligible crop
insurance contracts of insurance reinsured under this Agreement
as FCIC may require. Any such documents may not be used by the
Company until approved by FCIC.
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2. The Company may not sell any policy, contract of insurance,
endorsements, or other similar instrument that shifts or
increases risk to the eligible crop insurance contract offered
or reinsured by FCIC. Companies must submit contracts of
insurance to FCIC for review and consideration of compliance
with the provisions of this Agreement. FCIC will not reimburse
the company for any loss occurring on an eligible crop insurance
contract if the Company has sold a contract of insurance which
shifts or increases risk to the eligible crop insurance contract
reinsured under this Agreement.
3. The Company must maintain a record of policy numbers and
underwriting information pertaining to any additional risk
policies written in conjunction with eligible crop insurance
contracts reinsured under this Agreement, and a cross reference
to the eligible crop insurance contract.
4. The Company must utilize loss adjustment standards, procedures,
forms, methods, and instructions approved by FCIC.
F. Insurance Operations
1. Plan of Operations
a. This Agreement is not effective until FCIC has approved
the Company's Plan of Operation (Plan). The Plan must be
submitted to FCIC by April 1st preceding the reinsurance
year. FCIC will not renew the Agreement if a Plan is not
received by April 1st unless other arrangements are
mutually agreed upon. If the Plan is not approved by
July 1st of the reinsurance year, eligible crop
insurance contracts written or renewed with sales
closing dates between July 1st and the date the Plan is
approved will not be reinsured unless specifically
accepted by FCIC.
b. The Plan must meet the requirements and be in the format
as contained in Appendix 2.
c. The Company may submit a request to amend an approved
Plan at any time to reflect changing business
considerations and sales expectations. Such amendments
must be approved by FCIC before implementation by the
Company. The request will be evaluated following the
procedures applicable to a timely filed original Plan of
Operation, except that FCIC will consider, in addition,
the potential of adverse selection against FCIC.
Requests for amendment which are determined by FCIC to
increase the potential for adverse selection against
FCIC will be favorably considered only if FCIC
determines that its action or those of the United States
Department of Agriculture have substantially increased
the risk of underwriting loss on eligible crop insurance
contracts previously written by the Company with the
expectation that the current policies and procedures
would be continued.
d. The Plan is incorporated in this Agreement by reference.
Failure to follow the Plan may be a basis for FCIC to
terminate this Agreement.
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e. The Plan must describe the Company's training and
evaluation programs by which knowledge and competency of
selling agents and loss adjusters will be assured. The
Plan must also include the Company's procedures for
implementing an audit program to address the Company's
program performance and compliance.
2. The Company must sell all eligible crop insurance contracts
reinsured under this Agreement through properly trained and
licensed agents. Agents, brokers, solicitors, or any other sales
representatives of the Company who are authorized to quote
premium rates and coverage or provide other information
pertaining to eligible crop insurance contracts must hold an
insurance license issued by the state in which each such
contract is written.
3. The Company may not permit its sales agents, local agency
employees, sales supervisors, or any spouse or family member
residing in the same household as any such sales agent, local
agency employee, or sales supervisor to adjust losses, or
supervise, or otherwise control loss adjusters, not to
participate in the determination of the amount or cause of any
loss nor to verify yields of applicants for the purpose of
establishing any insurance coverage or guarantee, if the
eligible crop insurance contracts involved are sold or serviced
by or through the sales agent, local agency employee, the local
agency, any competing agency, or by any agent or local agency
supervised by the sales supervisor.
4. The Company and FCIC agree that FCIC will assume and perform the
obligations of the Company if the FCIC determines that the
Company's loss adjustment performance and practices are not
carried out in accordance with this Agreement. If the FCIC
assumes the Company's loss adjustment obligations under this
subsection, the Company will pay the FCIC an amount equal to ten
percent (10%) of the net book premium on the Company's book of
business pro-rated by the ratio that the number of claims
adjusted by FCIC bears to the total number of claims adjusted
under this Agreement. The Company will remain liable for the
losses on such eligible crop insurance contracts reinsured under
this Agreement. This payment will be due at the Company payment
date. Loss adjustment responsibility will be restored to the
Company when FCIC determines that the Company is capable of
complying and will comply with FCIC approved loss adjustment
procedures and practices.
5. The Company must verify all yields and other information used to
establish insurance guarantees. The Company will describe in its
Plan of Operations the procedure and system it will use to
provide such verification.
6. The Company and its agents must use standards, procedures,
forms, methods and instructions approved by FCIC in the sale and
service of MPCI contracts of insurance reinsured under this
Agreement.
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G. Access to Records and Operations
At FCIC's written request, the Company must provide FCIC access to its
offices, personnel (including agents and loss adjusters), and all records
that pertain to the business conducted under this Agreement for the purpose
of investigation, audit or examination, including access to records on the
operation of the Company. Records pertaining to premiums must be retained
for three (3) years after final adjustments of such premiums. Records
pertaining to indemnities must be available for a period of three (3) years
after final adjustment of a related claim for indemnity. FCIC may require on
a case-by-case basis the Company to retain certain specified records for a
period longer than three years. Even though records need not normally be
retained for longer than three years, the Company should be aware that the
statute of limitations for bringing a suit for any breach of the Standard
Reinsurance Agreement is six years. For the purpose of this paragraph the
term "FCIC" includes all U.S. Government agencies including but not limited
to USDA Office of Inspector General, the General Accounting Office, the
Comptroller General, and the Department of Labor.
H. Compliance and Corrective Action
1. The Company must be in compliance with the provisions of this Agreement,
the Standards for Approval as published by FCIC, the laws and
regulations of the United States, the laws and regulations of the state
in which the Company is conducting business under this Agreement, unless
such state laws and regulations are in conflict with this Agreement, and
all instructions of FCIC.
2. The Company must cooperate with FCIC in the review of Company operations
which are designed to assure policyholders are properly serviced,
that monies are distributed in accordance with the Act, and the FCIC
policies and procedures are being followed.
3. In lieu of termination of this agreement and in addition to suspension
of this agreement in accordance with the provisions of subsection V.I.,
if FCIC finds that the Company has not complied with the provisions of
paragraphs V.H.1. and 2. above, and the Company has not taken
appropriate steps to correct the non-compliance, FCIC may, at its
option:
a. Require, in writing, that the Company take corrective action within
forty-five (45) days of the date of such demand. The demand notice
shall state each contract violation or occurrence of non-compliance.
The Company must provide FCIC with satisfactory documentary evidence
of the corrective action taken to address the non-compliance or
reported violation, including but not limited to, appropriate
actions against any of its agents or other employees determined to
be responsible for the violation; and
b. Require that the Company refund or forfeit a share or all of the
expense reimbursement, premium subsidy, or reinsurance with respect
to the crop insurance contract violation identified.
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I. Termination and Suspension
1. If the Company does not fulfill all of its obligations under
this Agreement, FCIC may immediately terminate this Agreement
for cause.
a. If the Agreement is terminated for cause, FCIC will not
provide reinsurance for any crop insurance contracts
issued or renewed after the date of the termination.
FCIC will provide reinsurance for all eligible crop
insurance contracts in effect as of the date of the
termination until the next cancellation date.
b. FCIC may, but is not required to, assume all loss
adjustment activity for all eligible crop insurance
contracts under the Agreement as of the date of
termination of this Agreement. The Company will pay FCIC
ten percent (10%) of the net book premium of all
eligible crop insurance contracts to reimburse FCIC for
such loss adjustment activity.
c. In addition to the provisions of paragraph I.1.b., if
this Agreement should be terminated for cause, and not
for the convenience of the government, FCIC will suffer
damage to its ability to deliver crop insurance
throughout the United States as required by the Act.
FCIC will incur additional administrative costs to
ensure that policyholders are not deprived of the
opportunity to obtain crop insurance. Both parties agree
such damage is difficult to measure at the time the
Company enters into this Agreement. Therefore, should
this Agreement be terminated by FCIC for cause, the
Company agrees to pay FCIC in the form of liquidated
damages the equivalent of ten percent (10%) of the net
book premium of all eligible crop insurance contracts
that are reinsured by FCIC under this Agreement for that
contract year at the time this Agreement is terminated.
2. If FCIC terminates this Agreement at anytime for the convenience
of the government, FCIC will not provide reinsurance for any
eligible crop insurance contracts renewed or issued after the
date of the termination. Subject to the limitations specified in
subsection V.K., FCIC will continue to provide expense
reimbursement, premium subsidy, and reinsurance for eligible
crop insurance contracts in effect as of the date of the
termination until the next cancellation date. No additional
damages or amounts will accrue to the Company because of such
termination.
3. In the event a Company fails to pay any amount when due under
this Agreement, any further payments from FCIC will be withheld
until the amounts due FCIC are paid with appropriate interest.
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J. Renewal
This Agreement will continue in effect from year to year with an annual
renewal date of July 1st of each succeeding year unless FCIC or the
Company gives at least one hundred eighty (180) days advance notice in
writing to the other party that the Agreement will not be renewed.
K. Appropriation Contingency
The payment of obligations of FCIC under this Agreement are contingent
upon the availability of appropriations. Notwithstanding any other
provision of this Agreement, FCIC's ability to sustain the Agreement
depends upon the FCIC's Appropriation. If FCIC's Appropriation is
insufficient to pay the obligations under this Agreement, FCIC will
reduce its payments to the Company on a pro rata basis or on such other
method as determined by FCIC.
L. Replacement
This Agreement replaces any previous Standard Reinsurance Agreement
between FCIC and the Company. However, any eligible crop insurance
contract which is reinsured under a Standard Reinsurance Agreement in
effect prior to July 1, 1994, will remain reinsured under such previous
agreement until the end of the insurance period for that eligible crop
insurance contract.
M. Cut-Through and Preemption of State Law
1. Whenever the Company (including for the purposes of this
provision, any entity responsible to the Company for carrying
out any part of this Agreement) is unable to fulfill its
obligations to any policyholder by reason of a directive or
order duly issued by any Department of Insurance, Commissioner
of Insurance, or by any court of law having competent
jurisdiction, or under similar authority of any jurisdiction to
which the Company is subject, all eligible crop insurance
contracts affected by such directive or order that are in force
and directly or indirectly subject to this Agreement as of the
date of such inability or failure to perform will be immediately
transferred to FCIC without further action of the Company by the
terms of this Agreement. FCIC will assume all obligations for
unpaid losses whether occurring before or after the date of
transfer, and the Company must pay FCIC all funds in its
possession with respect to all such eligible crop insurance
contracts transferred including, but not limited to, premiums
collected. The Company hereby assigns to FCIC the right to all
uncollected premiums on all such policies. No assessment for
such funds or programs may be computed or levied on the
Company by any state for or on account of any premiums payable
on eligible crop insurance contracts reinsured under this
Agreement.
2. The provisions of 7 C.F.R. part 400 - subpart P are specifically
incorporated herein and made a part hereof.
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N. Litigation and Assistance
The Company's expenses incurred as a result of litigation are considered
part of the expense reimbursement paid in accordance with section IV, of the
Agreement. FCIC may, at its option, elect to provide assistance, and
direction, or it may elect to intervene in any legal action. The Company
agrees not to oppose such participation. Should the Company desire the
assistance, direction, or intervention of FCIC in a legal action it must do
the following:
1. immediately notify FCIC in writing of the requested action setting forth
the reasons such action would be in the best interests of FCIC;
2. retain legal counsel which is mutually acceptable to FCIC;
3. present all legal arguments favorable to its defense including those
suggested by FCIC; and
4. not join FCIC as a party to the action unless FCIC agrees in writing to
be joined as a party.
FCIC will at its sole discretion, determine if the requested action under
this section will be granted. The criteria to determine such action will be
whether such action is in the best interest of FCIC and the crop insurance
program.
O. Suspension and Debarment
Any person or business entity who has been determined by FCIC to be not
responsible or who has been debarred or suspended by FCIC or any other U.S.
Government Agency, may not be used by the Company in any manner which
involves performance under this Agreement if such suspension or debarment is
then in effect.
P. Member - Delegate
No member of or delegate to Congress nor any resident commissioner will be
admitted to any share or part of this Agreement or to any benefit that may
arise therefrom, except that this provision will not be construed to apply
to a benefit from this Agreement that accrues to a corporation for its
general benefit. Nor will this provision be construed to prohibit the
solicitation of any application for the crop insurance from or sale of any
eligible crop insurance contract to a member of or delegate to Congress or a
resident commissioner.
Q. Discrimination
The Company must not discriminate against any employee, applicant for
employment, insured, or applicant for insurance because of race, color,
religion, sex, age, physical handicap, marital status or national origin.
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R. Disputes
If the Company disputes action taken by FCIC under any provision of this
Agreement, the Company may appeal to FCIC in accordance with the
provisions of 7 C.F.R. Section 400.169.
S. Set off
1. Subject to the provisions of paragraph V.S.2. respecting
assignments, if the Company is indebted to FCIC, the amount of
such indebtedness may be set off against the proceeds of this
Agreement or any other amount which may be due to the Company by
the Corporation. If the Company is indebted to the United States
for taxes and notice of lien has been filed in accordance with
the provisions of the Internal Revenue Code of 1954 (26 U.S.C.
Section 6323) or any amendments thereto or modifications thereto
or Notice of Levy has been served on the Department of
Agriculture or FCIC in accordance with the provisions of the
Internal Revenue Code (26 U.S.C. Section 6331) against money
payable to the Company or if the Company is indebted to any
other agency of the United States, the amount of such taxes or
debt may likewise be set off.
2. Where an assignment has been made pursuant to the provisions of
subsection V.T. the following provision will apply with respect
to set off:
a. Notwithstanding the assignment, FCIC may set off:
i. any amount due FCIC under the Agreement;
ii. any amount for which the Company is indebted to
the United States for taxes for which a notice
of lien was filed or a Notice of Levy was served
in accordance with the provisions of the
Internal Revenue Code of 1954 (26 U.S.C. Section
6323), or any amendments thereto or
modifications thereof, before acknowledgement by
FCIC of receipt of the notice of assignment;
and
iii. any amounts, other than amounts specified in
paragraphs V.S.2.a.i. and ii. due to FCIC or any
other agency of the United States, if FCIC
notified the assignee of such amounts to be set
off at or before the time acknowledgement was
made of receipt of the notice of assignment.
b. Any indebtedness of the Company to any agency of the
United States which cannot be set off under paragraph
V.S.2.a. may be set off against any amount payable under
this Agreement which remains after deduction of amounts
(including interest and other charges) owing by the
Company to the assignee for which the assignment was
made.
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3. Any amount due the Company under this Agreement is not subject
to any lien, attachment, garnishment, or any other similar
process prior to that amount being paid under this Agreement,
unless such lien, attachment, or garnishment arises under title
26 of the United States Code.
4. Set off as provided in this section will not deprive the
Company of any right it might otherwise have to contest the
indebtedness involved in the set off action by administrative
appeal.
T. Assignment of Claims
No assignment by the Company shall be made of the Agreement, or the
rights thereunder, unless the Company assigns the proceeds of the
Agreement to a bank, trust company, or other financing institution,
including any federal lending agency, or to a person or firm that holds
a lien or encumbrance at the time of assignment, or, the Company
receives the prior approval of FCIC to assign the proceeds of this
Agreement to any other person or firm: Provided, That such assignment
will be recognized only if and when the assignee thereof files with FCIC
a written notice of the assignment together with a signed copy of the
instrument of assignment, and, provided further, that any such
assignment must cover all amounts payable and not already paid under the
Agreement, shall not be made to more than one party and shall not be
subject to further assignment, except that any such assignment may be
made to one party as agency or trustee for two or more parties.
U. Liability for Agents and Loss Adjusters
The Company is solely responsible for the conduct and training of its
personnel, agents and loss adjusters within the parameters of this
Agreement. Liability incurred, to the extent it is caused by agent or
loss adjuster error or omission, or for failure to follow FCIC approved
policy or procedure, is the sole responsibility of the Company.
Reinsurance of a policy or policies will not be denied unless: (1) there
exists a pattern of failure to follow FCIC approved policies or
procedures, or the allowance of errors or omissions; or (2) the Company
knew or should have known of the failure to follow FCIC approved
policies or procedures, or errors or omissions, and failed to take
appropriate action to correct the situation. Any amounts paid by FCIC to
the Company which are later determined to have been improperly paid
because of failure to follow FCIC approved policies or procedures or
because of error or omission, whether intentional or unintentional, will
be repaid by the Company to FCIC with appropriate interest on the next
monthly or annual report, whichever is applicable. If the Company shows,
to FCIC's satisfaction, that the agent or loss adjuster exercised
reasonable care in the sales and service of the policies under this
Agreement, FCIC may, at its sole discretion, waive, reduce or delay
repayment.
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V. Certification
The undersigned certifies that all information contained herein,
including the Plan of Operations with all appendixes, exhibits, and
supporting documentation is true, complete, and accurate. The
undersigned acknowledges that the Board of Directors has authorized the
Company to enter into this Agreement and the Plan of Operations. The
undersigned acknowledges any misrepresentation in the submission of this
Agreement and information contained in the Plan of Operations may result
in civil or criminal liability by the undersigned or their
representatives.
APPROVED AND ACCEPTED
for
FEDERAL CROP INSURANCE CORPORATION COMPANY
/s/ E. Heyward Baker /s/ Thomas F. Gowdy
- ---------------------------------- ------------------------------------
Signature Signature
/s/ E. Heyward Baker /s/ Thomas F. Gowdy
- ---------------------------------- ------------------------------------
Name Name
Vice President Marketing
Director IGF Insurance Co.
- ---------------------------------- ------------------------------------
Title Title
December 29, 1994 12-19-94
- ---------------------------------- ------------------------------------
Date Date
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APPENDIX 1
SECTION I. PROCUREMENT INTEGRITY
A. During this Agreement, the Company shall not knowingly:
1. make, directly or indirectly, any offer or promise of future
employment or business opportunity to, or engage, directly or
indirectly, in any discussion of future employment or business
opportunity with, any FCIC official;
2. offer, give, or promise to offer or give, directly or
indirectly, any money, gratuity, or other thing of value to any
FCIC official; or
3. solicit or obtain, directly or indirectly, from any officer or
employee of FCIC, prior to FCIC's acceptance of this Agreement
any proprietary or source selection information regarding the
Agreement.
B. During this Agreement, no FCIC official shall knowingly:
1. solicit or accept, directly or indirectly, any promise of future
employment or business opportunity from, or engage, directly or
indirectly, in any discussion of future employment or business
opportunity with, any officer, employee, representative, agent,
or consultant of the Company;
2. ask for, demand, exact, solicit, seek, accept, receive, or agree
to receive, directly or indirectly, any money, gratuity, or
other thing of value from any officer, employee, representative,
agent, or consultant of the Company; or
3. disclose any proprietary or source selection information
regarding the Agreement directly or indirectly to any person
other than a person authorized by FCIC to receive such
information.
C. During this Agreement, no person who is given authorized or unauthorized
access to proprietary information regarding the Agreement, shall
knowingly disclose such information, directly or indirectly, to any
person other than a person authorized by FCIC to receive such
information.
D. No Government official or employee who has participated personally and
substantially in the deliberation of the Agreement with the Company
shall:
1. participate in any manner, as an officer, employee, agent, or
representative of another party to this Agreement, in any
negotiations regarding such an Agreement, or
2. participate personally and substantially on behalf of another
party to this Agreement in the performance of such Agreement,
during the period ending 2 years after the last date such
individual participated personally and substantially in the
conduct of such Agreement.
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E. The definitions at 48 C.F.R. Section 3.104-4 are incorporated in this
Agreement for the purposes of this subsection.
F. If the Company fails to comply with this subsection, FCIC may terminate
this Agreement for cause.
G. For the purpose of this section, the term "FCIC Official" has the same
meaning as the term "Procurement Official" in section 6 of the Office of
Federal Procurement Policy Act Amendments of 1988 (Public Law 100-379).
SECTION II. DRUG FREE WORKPLACE
A. For the purposes of this section the following definitions apply:
1. "Controlled Substance" means a controlled substance contained
in schedules I through V of section 202 of the Controlled
Substances Act (21 U.S.C. Section 812) and as further defined at
21 C.F.R. Sections 1308.11-1308.15.
2. "Conviction" means a finding of guilt (including a plea of nolo
contendere) or imposition of sentence, or both, by any judicial
body charged with the responsibility to determine violations of
the Federal or state criminal drug statutes.
3. "Criminal Drug Statute" means a Federal or non-federal criminal
statute involving the manufacture, distribution, dispensing,
possession, or use of any controlled substance.
4. "Drug-free Workplace" means a site for the performance of work
done by the Company in connection with the Agreement at which
employees of the Company are prohibited from engaging in the
unlawful manufacture, distribution, dispensing, possession, or
use of a controlled substance.
5. "Directly Engaged" is defined to include all direct cost
employees and any other contract employee who has other than a
minimal impact or involvement in the Company's performance.
6. "Employee" means an employee of a Company directly engaged in
the performance of work under the Agreement.
B. The Company certifies and agrees, that with respect to all employees of
the Company to be employed pursuant to the Agreement, it will--no later
than thirty (30) days after the date this Agreement goes into effect;
complete the following:
1. Publish a statement notifying its employees that the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance is prohibited in the Company's workplace
and specifying actions that will be taken against employees for
violations of such prohibition;
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2. Establish an ongoing drug-free awareness program to inform
employees about the dangers of drug abuse in the workplace, the
Company's policy of maintaining a drug-free workplace, the
availability of drug counseling, rehabilitation, employee
assistance programs, and penalties that may be imposed upon
employees for drug abuse violations occurring in the workplace;
3. Provide all employees engaged in the performance of the
Agreement with a copy of the statement required by paragraph
(2);
4. Notify employees in writing of the statement required by
paragraph (2) of this provision that, as a condition of
continued employment on the Agreement resulting from this
solicitation, the employee will abide by the terms of this
statement, and notify the employer in writing of the employee's
conviction under a criminal drug statute for a violation
occurring in the workplace no later than five (5) days after
such conviction;
5. Notify FCIC in writing within ten (10) days after receiving
notice under paragraph (4), from any employee or otherwise
receiving actual notice of such conviction. The notice shall
include the position title of the employee; and
6. Within 30 days after receiving notice under paragraph (4) of a
conviction, take one of the following actions with respect to
any employee who is convicted of a drug abuse violation
occurring in the workplace: a) take appropriate personnel action
against such employee, up to and including termination or b)
require that such employee satisfactorily participate in a drug
abuse assistance or rehabilitation program approved for such
purposes by a federal, state, or local health, law enforcement,
or other appropriate agency.
7. Make a good faith effort to maintain a drug free workplace
through the implementation of this provision.
C. The Company certifies and agrees that it will not engage in the unlawful
manufacture, distribution, dispensing, possession, or use of a
controlled substance in the performance of this Agreement.
SECTION III. ANTI-LOBBYING
A. The following definitions apply only to the provisions of this section.
1. "Agency," as used in this article, means executive agency as
defined in 48 C.F.R. Section 2.101.
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2. "Covered Federal Action," means any of the following Federal actions:
i. The awarding of any Federal contract.
ii. The making of any Federal grant.
iii. The making of any Federal loan.
iv. The entering into of any cooperative agreement.
v. The extension, continuation, renewal, amendment, or modification
of any Federal contract, grant, loan, or cooperative agreement.
3. "Indian Tribe" and "Tribal Organization", has the meaning provided in
section 4 of the Indian Self-Determination and Education Assistance Act
(25 U.S.C. section 450B) and includes Alaskan Natives.
4. "Influencing or attempting to influence," means making, with the intent
to influence, any communication to or appearance before an officer or
employee of any agency, a Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with any
covered Federal action.
5. "Local government," means a unit of government in a state and, if
chartered, established, or otherwise recognized by a state for the
performance of a governmental duty, including a local public authority,
a special district, an intrastate district, a council of governments, a
sponsor group representative organization, and any other instrumentality
of a local government.
6. "Officer or employee of an agency," includes the following individuals
who are employed by an agency:
i. An individual who is appointed to a position in the Government
under title 5, United States Code, including a position under a
temporary appointment.
ii. A member of the uniformed services, as defined in subsection
101(3), title 37, United States Code.
iii. A special Government employee, as defined in section 202, title
18, United States Code.
iv. An individual who is a member of a Federal advisory committee,
as defined by the Federal Advisory Committee Act, title 5,
United States Code, appendix.
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7. "Person," means an individual, corporation, company,
association, authority, firm, partnership, society, state, and
local government, regardless of whether such entity is
operated for profit, or not for profit. This term excludes an
Indian tribe, tribal organization, or any other Indian
organization with respect to expenditures specifically
permitted by other Federal law.
8. "Reasonable compensation," means, with respect to a regularly
employed officer or employee of any person, compensation that
is consistent with the normal compensation for such officer or
employee for work that is not furnished to, not funded by, or
not furnished in cooperation with the Federal Government.
9. "Reasonable payment," means, with respect to professional and
other technical services, a payment in an amount that is
consistent with the amount normally paid for such services in
the private sector.
10. "Recipient," includes the Company and all related Company
representatives. This term excludes an Indian tribe, tribal
organization, or any other Indian organization with respect to
expenditures specifically permitted by other Federal law.
11. "Regularly employed," means, with respect to an officer or
employee of a person requesting or receiving a federal
contract, an officer or employee who is employed by such
person for at least 130 working days within 1 year immediately
preceding the date of the submission that initiates agency
consideration of such person for receipt of such contract. An
officer or employee who is employed by such person for less
than 130 working days within 1 year immediately preceding the
date of the submission that initiates agency consideration of
such person shall be considered to be regularly employed as
soon as he or she is employed by such person for 130 working
days.
12. "State," means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, a territory or
possession of the United States, an agency or instrumentality
of a state, and multi-state, regional, or interstate entity
having governmental duties and powers.
B. The definitions and prohibitions contained in the Federal Acquisition
Regulation, at 48 C.F.R. Section 52.203-12, Limitation on Payments to
Influence Certain Federal Transactions, are hereby incorporated by
reference herein.
C. The Company hereby certifies to the best of his or her knowledge and
belief that:
1. No federal appropriated funds have been paid or will be paid to
any person for influencing or attempting to influence an
officer or employee of any agency, a Member of Congress, an
officer or employee of Congress, or an employee of a Member of
Congress on his or her behalf in connection with the awarding
of any federal contract, the making of any federal grant, the
making of any federal loan, the entering into of any
cooperative agreement, and the extension, continuation,
renewal, amendment or modification of any federal contract,
grant, loan, or cooperative agreement;
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2. If any funds other than federal appropriated funds (including profit
or fee received under a covered federal transaction) have been paid,
or will be paid, to any person for influencing or attempting to
influence an officer or employee of any agency, a Member of Congress,
an officer or employee of Congress, or an employee of a Member of
Congress on his or her behalf in connection with this Agreement, the
Company shall complete and submit OMB standard form LLL, Disclosure of
Lobbying Activities, to the FCIC; and
3. The Company will include the language of this certification in all
subcontract awards at any tier and require that all recipients of
subcontract awards in excess of $100,000 shall certify and disclose
accordingly.
D. Submission of this certification and disclosure is a prerequisite for
making or entering into this Agreement as imposed by section 1352, title
31, United States Code. Any person who makes an expenditure prohibited
under this provision or who fails to file or amend the disclosure form to
be filed or amended by this provision, shall be subject to a civil penalty
of not less than $10,000, and not more than $100,000, for each such
failure.
E. The prohibitions contained in section 1352 of title 31, United States Code,
are incorporated by reference and prohibit a recipient of a federal
contract, grant, loan, or cooperative agreement from using appropriated
funds to pay any person for influencing or attempting to influence an
officer or employee of any agency, a Member of Congress, an officer or
employee of Congress, or an employee of a Memeber of Congress in connection
with any of the following covered federal actions: the awarding of any
federal contract; the making of any federal grant; the making of any
federal loan; the entering into of any cooperative agreement; or the
modification of any federal contract, grant, loan, or cooperative
agreement. The Company is also required to furnish a disclosure if any
funds other than federal appropriated funds (including profit or fee
received under a covered federal transaction) have been paid, or will be
paid, to any person for influencing or attempting to influence an officer
or employee of any agency, a Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with a
federal contract, grant, loan, or cooperative agreement.
F. The prohibitions of paragraph E do not apply under the following
conditions:
I. Agency and legislative liaison by own employees
a. The prohibition on the use of appropriated funds, does not apply
in the case of a payment of reasonable compensation made to an
officer or employee of a person requesting or receiving a
covered federal action if the payment is for agency and
legislative liaison activities not directly related to a covered
federal action.
b. Providing any information specifically requested by an agency or
Congress is permitted at any time.
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c. The following agency and legislative liaison activities are permitted at
any time where they are not related to a specific solicitation for any
covered federal action: (i) discussing with an agency the qualities and
characteristics (including individual demonstrations) of the person's
products or services, conditions or terms of sale, and service
capabilities; and (ii) technical discussions and other activities
regarding the application or adaptation of the person's products or
services for an agency's use.
d. The following agency and legislative liaison activities are permitted
where they are prior to formal solicitation of any covered federal
action: (i) providing any information not specifically requested but
necessary for an agency to make an informed decision about initiation of
a covered federal action; (ii) technical discussions regarding the
preparation of an unsolicited proposal prior to its official submission;
and (iii) capability presentations by persons seeking awards from an
agency pursuant to the provisions of the Small Business Act, as amended
by Pub. L. 95-507, and subsequent amendments.
e. Only those services expressly authorized by subparagraph F.1 are
permitted.
2. Professional and technical services
a. The prohibition on the use of appropriated funds, in paragraph F.1.a,
does not apply in the case of: (i) a payment of reasonable compensation
made to an officer or employee of a person requesting or receiving a
covered federal action or an extension, continuation, renewal,
amendment, or modification of a covered federal action, if payment is
for professional or technical services rendered directly in the
preparation, submission, or negotiation of any bid, proposal, or
application for that federal action or for meeting requirements imposed
by or pursuant to law as a condition for receiving that federal action;
(ii) any reasonable payment to a person other than an officer or
employee of a person requesting or receiving a covered federal action or
an extension, continuation, renewal, amendment, or modification of a
covered federal action, if the payment is for professional or technical
services rendered directly in the preparation, submission, or
negotiation of any bid, proposal, or application for that federal action
or for meeting requirements imposed by or pursuant to law as a condition
for receiving that federal action. Persons other than officers or
employees of a person requesting or receiving a covered federal action
include consultants and trade associations.
b. For purposes of the provisions of (i) of the preceding paragraph,
"professional and technical services" shall be limited to advice and
analysis directly applying any professional or technical discipline. For
example, drafting of a legal document accompanying a bid or proposal by
a lawyer is allowable. Similarly, technical advice provided by an
engineer on the performance or
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operational capability of a piece of equipment rendered directly
in the negotiation of a contract is allowable. However,
communications with the intent to influence made by a
professional (such as a licensed lawyer) or a technical person
(such as a licensed accountant) are not allowable under this
section unless they provide advice and analysis directly
applying their professional or technical expertise and unless
the advice or analysis is rendered directly and solely in the
preparation, submission, or negotiation of a covered federal
action. Thus, for example, communications with the intent to
influence made by a lawyer that do not provide legal advice or
analysis directly and solely related to the legal aspects of his
or her client's proposal, but generally advocate one proposal
over another are not allowable under this section because the
lawyer is not providing professional legal services. Similarly,
communications with the intent to influence made by an engineer
providing an engineering analysis prior to the preparation or
submission of a bid or proposal are nor allowable under this
section since the engineer is providing technical services but
not directly in the preparation, submission, or negotiation of a
covered federal action.
c. Requirements imposed by or pursuant to law as a condition for
receiving a covered federal award include those required by law
or regulation and any other requirements in the actual award
documents.
d. Only those services expressly authorized by paragraph F.2.a.(i)
are permitted under this article.
e. The reporting requirements of 48 C.F.R. Section 3.803(a) shall
not apply with respect to payments of reasonable compensation
made to regularly employed officers or employees of a person.
3. Disclosure
a. The Company shall file with FCIC a disclosure form, OMB Standard
Form LLL, Disclosure of Lobbying Activities, if such person has
made or has agreed to make any payment using non-appropriated
funds (to include profits from any covered federal action),
which would be prohibited, if paid for with appropriated funds.
b. The Company shall file a disclosure form at the end of each
calendar quarter in which there occurs any event that materially
affects the accuracy of the information contained in any
disclosure form previously filed by the Company under this
section. An event that materially affects the accuracy of the
information reported includes-i) A cumulative increase of
$25,000 or more in the amount paid or expected to be paid for
influencing or attempting to influence a covered federal action;
or ii) A change in the person or individual influencing or
attempting to influence a covered federal action; or iii) A
change in the officer, employee, or Member contracted to
influence or attempt to influence a covered federal action.
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c. The Company shall require the submittal of a certification, and
if required, a disclosure form by any person who requests or
received any subcontract exceeding $100,000 under the federal
contract.
d. All subcontractor disclosure forms (but not certifications)
shall be forwarded from tier to tier until received by the
Company. The Company shall submit all disclosures to FCIC at the
end of the calendar quarter in which the disclosure form is
submitted by the subcontractor. Each subcontractor certification
shall be retained in the subcontract file of the Company.
4. Agreement. The Company agrees not to make any payment prohibited by
this Agreement.
5. Cost allocability. Nothing in this section makes allowable or
reasonable any costs which would otherwise be unallowable or
unreasonable. Conversely, costs made specifically unallowable by the
requirements in this section will not be made allowable under any other
provision.
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APPENDIX 2
PLAN OF OPERATION
STANDARD REINSURANCE AGREEMENT
REINSURANCE YEAR BEGINNING JULY 1, 1994
The Plan of Operation (Plan) is specified in the Standard Reinsurance Agreement
between the Federal Crop Insurance Corporation (FCIC) and the Company. This
Plan must contain the information requested herein and the Company must provide
its certification as to the accuracy and completeness of the Plan. The Plan
will be used by FCIC to determine the Company's qualifications for
participation in this reinsurance program. The Plan will be incorporated into
and become part of the Standard Reinsurance Agreement.
The Company must file a new Plan for each subsequent reinsurance year. Failure
by the Company to file a Plan for any subsequent reinsurance year will result
in the suspension of the Company's authority to issue or renew eligible crop
insurance contracts for subsidy or reinsurance by FCIC.
Any changes in the Plan must be reported by the Company to FCIC within fifteen
days from the date of the change. Information, documents, exhibits, or forms,
are to be numbered in the Plan of Operation to correspond with the paragraphs
herein to which they pertain. The information required is:
1. The name, address, phone number, and tax identification number of the
Company.
2. The names, addresses, and tax identification numbers of all other
insurance companies who will issue eligible crop insurance contracts
that are reinsured or insured by the Company.
3. The names, phone numbers, and addresses of a managing general agency,
or any other organization or established place of business, except as
listed in item 1 and 2 above, which is responsible for producing and
electronically processing any multiple peril crop insurance business
under this Agreement. Specify in what capacity each organization listed
will act on behalf of the Company. Organizational charts with
supervisory lines of authority for the managing general agency only.
4. If applicable, a letter of confirming authority from an officer of the
Company as listed in the Company's Annual Statement filed with any
state, authorizing and empowering a managing general agency or general
agency to secure insurance liability on behalf of the Company in
producing multiple peril crop insurance business.
5. The names, titles, addresses, and telephone numbers of at least two
persons designated by the Company as managers of the multiple peril crop
insurance program. Each person will act as liaison or contact for the
Company to the FCIC regarding this Agreement.
6. The addresses and telephone numbers of each regional office, general
agency, service center, or any other Company designated office other
than the Company's or managing general agency's home office.
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a. The identity of each regional office, general agency, service
center, and other Company designated office, which will retain
original insurance documents relative to policyholder servicing,
(i.e. applications, acreage reports, summaries of coverage,
proofs of loss and similar documents), and including the names
of the office managers and the identity of the states serviced.
b. The identity of the field or regional offices, general agencies,
service centers, or other Company designated office which will
key-punch, submit on data disk or tape, or electronically
process original insurance documents relative to policyholder
servicing, (i.e. applications, acreage reports, summaries of
coverage, proofs of loss and similar documents), including the
names of the office managers and the states serviced. (If
identical to 6. a., so state.)
c. The types of insurance documents key-punched, submitted on data
disk or tape, or electronically processed by each organization
indicated in items 6.a. and b.
d. The Company is required to provide FCIC access to Agent and Loss
Adjuster Identification Data maintained by the Company for the
purposes of issuing Agent Directory information, and a source
for agent and loss adjuster codes verification. This data shall
be provided in accordance with Manual 13.
7. The names and addresses of organizations other than the Company that
will provide the following services for the multiple peril crop
insurance programs of the Company.
a. Administration of rates and development of policies and forms.
b. Preparation of statistical data for transmission to FCIC.
c. Providing of training for loss adjusters.
d. Providing of training for sales personnel.
e. Issuance of FCIC approved policies and procedures.
8. All state licenses held by the Company and its policy issuing companies
under the insurance laws or regulations of any state or Insurance
Department of the state in which the Company produces its book of
business including, but not limited to, the date each license was issued
and its expiration date or renewal date. (If the license is considered
"perpetual", without renewal, this must be indicated.)
9. The Company's most recent annual and quarterly statement filed with the
Insurance Department for the state in which the Company is domiciled and
a copy of any report on internal controls or management recommendations
received from independent auditors. Statutory Management Discussion and
Analysis; most recent State Insurance Department Examination Report;
Actuarial Opinion of Reserves; Annual GAAP Statement or Form 10K (if
applicable); and the Audited Annual Report to Shareholders; and any
other information determined necessary by FCIC.
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10. The Company's eleven current financial ratios defined in the National
Association of Insurance Commissioners Insurance Regulatory Information
System (IRIS) as required by FCIC.
11. The maximum reinsurable premium volume for the reinsurance year.
(This may be more than the total provided in Item 12).
12. An estimate (Exhibit 12) of the multiple peril crop insurance net book
premium to be designated in each fund within each state for the
reinsurance year.
13. A declaration (Exhibit 13) of the percent of the net book premiums and
associated liability for ultimate net losses the Company will retain in
the Commercial Fund within each state.
14. A declaration (Exhibit 14) of the percent of net book premiums and
associated liability for ultimate net losses the Company will retain in
the Developmental Fund within each state. In addition, a declaration of
the net book premiums and associated liability for ultimate net losses
designated to the Developmental Fund by Crop or County within each
state.
15. A declaration as to the Company's intention to participate in the
Assigned Risk Fund within the limits outlined in Exhibit 15, Maximum
Cessions to Assigned Risk Fund.
16. The name and address of the Company or general agency and the bank that
will make electronic fund transfer (EFT) payments to FCIC for the
Company.
17. The name and address of the organization to whom payments from FCIC
should be remitted for amounts due on Monthly and Annual Summary
reports.
18. A declaration as to the Company's intention to use the Escrow
Agreement if reimbursements by FCIC for losses paid by the Company will
be made through the procedures covered by the Escrow Agreement. If
applicable, complete and attach Exhibit 27, Escrow
Agreement/Arrangement.
19. A declaration as to the Company's intention to place a portion of its
net (after FCIC reinsurance) multiple peril crop insurance liability in
the commercial reinsurance market. The following information is required
by January 31 each reinsurance year:
a. The name and principal of each commercial reinsurer.
b. A copy of the reinsurance treaties issued to the Company by the
principal reinsurers which outline the description of
reinsurance including type, attachment points and limits,
aggregate limits, minimum deposit, and variable premium rates.
c. The subscription of each reinsurer to each such treaty, or
reinsurance binder for each the reinsurer, the intermediaries,
or brokers of reinsurance.
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20. The Company must report their allowable MPCI expenses (Exhibit 20A) using
the National Association of Insurance Commissioners (NAIC) allocation
methods contained in the most recent Financial Condition Examiners Handbook
(Handbook), Uniform Accounting Section, Parts II through V.
Exhibit 20A. - Listing of Allowable Expenses.
Exhibit 20B. - NAIC Insurance Expense Exhibit (IEE), Part I, Allocation to
Expense Groups. MPCI expenses are to be shown before FCIC reimbursement by
expense group and classification. FCIC expense and tax reimbursement should
be shown on line 21. Miscellaneous Operating Expenses.
Exhibit 20C. - NAIC Insurance Expense Exhibit (IEE), Part 2, Allocation to
Lines of Business Net of Reinsurance. MPCI expenses are to be shown before
FCIC reimbursement net of commercial reinsurance, FCIC expense and tax
reimbursement shown on line 31, Aggregate Write-ins for Other Lines of
Business.
Exhibit 20D. - NAIC Insurance Expense Exhibit (IEE), Part 3, Allocation to
Lines of Direct Business Written. MPCI expenses are to be shown before FCIC
reimbursement. FCIC expense and tax reimbursement shown on line 31,
Aggregate Write-ins for Other Lines of Business.
21. The quality control (self-audit) plan which includes a copy of the
procedures and standards developed by the Company, or its service
organization and adopted by the Company as its quality control (self-audit)
procedure. This plan must meet the guidelines and expectations of FCIC
required by Manual 14. The quality control (self-audit) plan must include
the monitoring of producer certification, Company determination and
verification of yield data, or other information used to establish
insurance guarantees that meets the guidelines contained in Manual 14.
22. The training plan which includes an outline of the training programs
utilized by the Company to evaluate the knowledge and competency of sales
and loss adjustment personnel. This plan must meet the guidelines required
by Manual 14.
NOTE: Each assurance statement referenced in items 23 - 26 below must be
signed by the same officer of the Company accepting this Agreement and who
has signed for the Company on page 23 of the Agreement.
23. The Company must submit in accordance with section I. of Appendix I, its
assurance statement regarding procurement integrity. The statement must
provide FICC the assurance that requirements under this section are met.
24. The Company must submit in accordance with section II. of Appendix I, its
assurance statement regarding a drug free workplace. The assurance
statement should include an outline of the Company's procedure to ensure
that requirements of this section are met.
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25. The Company must submit in accordance with section III. of Appendix I, its
assurance statement regarding anti-lobbying. OMB Form LLL, Disclosure of
Lobbying Activities, (Exhibit 28), if applicable, must be filed with FCIC
in accordance with this section.
26. The Company must submit in accordance with section VI. of Appendix I, its
assurance statement regarding discrimination. The assurance statement must
meet the requirements contained in Manual 14.
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