BULLETIN NO.: MGR-98-020
TO: All Reinsured Companies; OVERNIGHT MAIL
All Risk Management Field Offices
All Other Interested Parties
FROM: Kenneth D. Ackerman /s/ Kenneth D. Ackerman July 30, 1998
Administrator
SUBJECT: Revised Amendment No.1 to the 1998 SRA to Implement the 1998 Research
Act
BACKGROUND:
On June 30, 1998, the Federal Crop Insurance Corporation (FCIC) issued
MGR-98-018 and Amendment No. 1 to the 1998 Standard Reinsurance Agreement (1998
SRA) to implement changes required by Subtitle C of the Agricultural Research,
Extension, and Education Reform Act of 1998 (1998 Research Act). The crop
insurance industry requested additional time to sign and submit the amendment so
that several issues regarding the administration of changes under the 1998
Research Act could be clarified. On July 22, 1998, FCIC officials met with the
Industry Steering Committee to discuss the outstanding issues and the following
was decided: 1) FCIC will collect administrative fees after it is notified that
policyholders are indebted for non-payment of administrative fees and declared
as such through the Ineligible Tracking System; and 2) Eligible crop insurance
contracts for which fees are due shall be terminated due to indebtedness
effective for the crop year following the termination date used to determine the
policyholder's ineligibility.
ACTION:
Attached are two copies of the revised Amendment No. 1 to the 1998 SRA which
must be executed for FCIC to provide reinsurance and subsidy in the 1999 and
subsequent reinsurance years. Each copy must be signed as an original and
returned to FCIC at the address shown below via overnight mail within 10
business days after receipt. The amendment should be signed by the person
authorized by the reinsured company's Board of Directors to enter into the SRA.
OVERNIGHT MAIL: USDA/Risk Management Agency
Reinsurance Services Division
E. Heyward Baker, Director
1400 Independence Avenue, SW
Stop Code: 0804; Room 6727-S
Washington, DC 20250
Phone: (202) 720-4232
Failure to execute the amendment will terminate your Standard Reinsurance
Agreement as of the end of the 1998 reinsurance year (June 30, 1998).
Attachments (2) - will follow in overnight mail
1998 Standard Reinsurance Agreement
(Rev. 7/29/98)
AMENDMENT NO. 1 TO THE
1998 STANDARD REINSURANCE AGREEMENT
The Standard Reinsurance Agreement between the Federal Crop Insurance
Corporation and the undersigned Company is hereby amended for the 1999 and
subsequent reinsurance years, as follows:
(I) Section III.A.2. is amended to read as follows:
2. A&O subsidy for eligible crop insurance contracts will be determined as
set forth below and will be paid to the Company on the monthly summary
report after the Company submits, and FCIC accepts, the information
needed to accurately establish the premium for such eligible crop
insurance contracts. Notwithstanding the provisions of this section,
under no circumstances will A&O subsidy be paid in excess of the amount
authorized by statute.
a. For any eligible CAT crop insurance contract, zero percent of
net book premium.
b. For eligible crop insurance contracts that provide coverage
under GRP, 22.7 percent of the net book premium attributed to
such eligible crop insurance contracts.
c. For revenue insurance plans that can increase liability
whenever the market price at the time of harvest exceeds the
market price at the time of planting, 21.1 percent of the net
book premium attributed to such eligible crop insurance
contracts; and
d. For revenue insurance plans that can not increase liability
whenever the market price at harvest exceeds the market price
at the time of planting, 24.5 percent of the net book premium
attributed to such eligible crop insurance contracts, not to
exceed the amount that would have been paid had each eligible
producer purchased limited or additional coverage under an
insurance plan that insures loss of individual yield; and
e. For all other eligible crop insurance contracts, 24.5 percent
of the net book premium attributed to such eligible
crop insurance contracts.
(II) Section III.B. is amended to read as follows:
B. The Company shall remit to FCIC, in accordance with Manual 13, the
following administrative fees collected from eligible
producers:
1. For CAT:
a. Basic fee: the greater of $50 or 10 percent of the
net book premium for each eligible crop insurance
contract; and
b. Additional fee: $10 for each eligible crop insurance
contract.
c. In the event the eligible producer is a limited
resource farmer as defined in 7 C.F.R. 400.651, the
Company shall submit the required information to FCIC
in accordance with Manual 13 and FCIC shall waive the
appropriate fee on the monthly summary report.
2. For limited coverage:
a. $50 per eligible crop insurance contract, not to
exceed $200 per county and $600 for all counties
combined for each eligible producer.
b. In the event the eligible producer is a limited
resource farmer as defined in 7 C.F.R. 400.651, the
Company shall submit the required information to FCIC
in accordance with Manual 13 and FCIC shall waive the
appropriate fee on the monthly summary report.
3. For additional coverage, an additional fee of $20 per
eligible crop insurance contract.
(III) Section IV is amended to read in its entirety as follows:
FCIC will pay to the Company an amount equal to 11.0 percent of the total net
book premium for eligible CAT crop insurance contracts. The loss adjustment
expense specified in this section will be included in the monthly summary report
containing the data obtained from acreage reports that have met the processing
provisions specified in Manual 13.
(IV) Section V.B.4. is added to read as follows:
4. Producer premiums and administrative fees collected by the
Company must be reported as follows:
For CAT crop insurance contracts, all administrative fees must be
reported on the monthly summary report following the month containing
the termination date.
For all other crop insurance contracts, producer premiums and all
administrative fees must be reported on the monthly summary report for
the earlier of the month following the date of collection or the month
following the month containing the billing date if uncollected.
(V) Section V.B.9. and 10. are to read as follows:
9. Policyholders who do not pay administrative fees on or before the
applicable termination date are ineligible because of indebtedness and
the Company shall report such via the Ineligible File Tracking System.
Administrative fees payable by such policyholders will offset the total
fees reported in accordance with Section V.B.4. Crop insurance
contracts shall be reported as terminated for indebtedness effective
for the crop year immediately following the termination date used to
determine the policyholder's status of eligibility.
10. If the Company terminates the policy due to the non-payment of
administrative fees and reports such to FCIC through Ineligible
Tracking System, FCIC will perform debt collection activities for
administrative fees which are due from indebted policyholders.
The undersigned Company representative acknowledges that the Company's Board of
Directors has authorized the Company to enter into this Amendment of the 1998
Standard Reinsurance Agreement.
APPROVED AND ACCEPTED
for
FEDERAL CROP INSURANCE CORPORATION THE COMPANY
Signature Signature
Name Name
Title Title
Date Date