[Federal Register Volume 64, Number 137 (Monday, July 19, 1999)]
[Rules and Regulations]
[Pages 38537-38546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18263]



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  Federal Register / Vol. 64, No. 137 / Monday, July 19, 1999 / Rules 
and Regulations  

[[Page 38537]]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation
RIN 0563-AB15

7 CFR Part 400


General Administrative Regulations; Submission of Policies and 
Provisions of Policies, and Rates of Premium

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
specific General Administrative Regulations. The effect of this action 
is to prescribe the guidelines necessary to implement and administer 
sections 506 and 508 of the Federal Crop Insurance Act, as amended 
(Act), with respect to the submission of policies and provisions of 
policies and rates of premium to FCIC's Board of Directors (Board) for 
review, approval or disapproval, publication, and implementation.

EFFECTIVE DATE: August 18, 1999.

FOR FURTHER INFORMATION CONTACT: Timothy Hoffmann, Director, Product 
Development Division, Federal Crop Insurance Corporation, United States 
Department of Agriculture, 9435 Holmes Road, Kansas City, MO 64131, 
telephone (816) 926-3707.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has determined this rule 
to be significant for the purposes of Executive Order 12866 and, 
therefore, this rule has been reviewed by OMB.

Impact Analysis

    An Impact Analysis has been completed and is available to 
interested persons at the address listed above. In summary, the 
guidelines contained in this regulation are administrative in nature. 
They are intended to facilitate the review for approval of policy terms 
and conditions, endorsements, actuarial documents, underwriting rules, 
administrative procedures, and rates of premium for new insurance 
products submitted to FCIC under section 508(h) of the Act for Board 
approval/disapproval. They contain very little in the way of program 
policy. While some comments on the proposed rule were received that new 
products were being held to a ``higher standard'' than FCIC's 
traditional products, there is nothing in the regulation that differs 
from standard operating procedure for the existing crop insurance 
program. In most cases, the provisions of the regulation are dictated 
by statutory requirements, for example, the requirement for an 
actuarially appropriate premium rate structure.

Paperwork Reduction Act of 1995

    It has been determined by OMB that this rule is exempt from the 
information collection requirement contained under the Paperwork 
Reduction Act of 1995 (44 U.S.C. chapter 35).

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on States or their political subdivisions, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. The rule provides the guidelines 
to be used by all approved insurance providers, or any other applicant, 
FCIC, and the Board for the submission, review, and approval of 
policies, provisions of policies, or rates of premium which, if 
approved by the Board, will be sold to producers through approved 
insurance providers and reinsured by FCIC or incorporated into policies 
reinsured by FCIC. Any submission is entirely voluntary. This 
regulation will not impose more stringent requirements on small 
entities than on large entities. Therefore, this action is determined 
to be exempt from the provisions of the Regulatory Flexibility Act (5 
U.S.C. 601 et. seq.), and no Regulatory Flexibility Analysis was 
prepared.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with State and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. The administrative appeal provisions published 
at 7 CFR 400.169 must be exhausted before any action for judicial 
review of any determination made by FCIC may be brought.

Environmental Evaluation

    This action is not expected to have a significant impact on the 
quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review Initiative to eliminate

[[Page 38538]]

unnecessary or duplicative regulations and improve those that remain in 
force.

Background

    On Thursday, September 11, 1997, FCIC published a notice of 
proposed rule making in the Federal Register at 62 FR 47772 to make 
available guidelines necessary to carry out the requirements of the Act 
with respect to the submission of policies and materials to the Board. 
FCIC makes available standard policies and forms for use by insurance 
providers in insuring certain crops against various agricultural 
production risks and perils. Under section 508(h) of the Act, any 
person may submit or propose other crop insurance policies, provisions 
of policies, or rates of premium for insuring wheat, soybeans, field 
corn, and any other crop determined by the Secretary of Agriculture. 
The Act states that these policies may be submitted without regard to 
limitations contained in the Act. The Act also requires that FCIC issue 
regulations to establish guidelines for the submission and FCIC Board 
review of policies or other materials submitted to the Board. This 
regulation provides such guidelines.
    Following publication of the proposed rule, the public was afforded 
60 days to submit written comments and opinions. A total of 53 comments 
were received from an insurance service organization and from several 
reinsured companies. The comments received and FCIC's responses are as 
follows:
    Comment: An insurance service organization asked if under section 
400.700(c)(3) which states that: ``rates of premiums for multiple peril 
crop insurance'' may be submitted for consideration, means that 
insurance companies may submit rates for ``regular'' multiple peril 
crop insurance coverage other than those published in FCIC's actuarial 
documents.
    Response: Section 508(h)(1)(B) of the Act allows a person to submit 
rates of premiums to the Board for the multiple peril crop insurance 
program for those wheat, soybeans, field corn, or any other crops 
determined by the Secretary, if the provisions for insurance are 
materially different from FCIC's provisions of insurance as published 
at 7 CFR chapter IV.
    Comment: An insurance service organization questioned the 
difference between the definition of ``MPCI'' contained in section 
400.701 and the term ``multiple peril crop insurance'' as referenced in 
section 400.700(c)(3). The commenter suggested adding a definition of 
multiple peril crop insurance to distinguish the difference between the 
two terms.
    Response: There is no distinction between the term ``multiple peril 
crop insurance'' in section 400.700(c)(3) and the definition of MPCI in 
section 400.701. However, FCIC has amended the definition of MPCI to 
mean FCIC multiple peril crop insurance policies codified in 7 CFR 
chapter IV.
    Comment: An insurance service organization suggested changing the 
definition of ``policy'' contained in section 400.701 as new crop 
insurance provisions submitted for approval may not always need all of 
the provisions and endorsements listed in the definition. They 
suggested using ``the appropriate policy provisions and endorsements'' 
in lieu of listing all the provisions and endorsements.
    Response: FCIC has amended the definition of ``policy.''
    Comment: An insurance service organization and a reinsured company 
recommended clarifying the term ``all information'' contained in 
section 400.702(b) by specifying ``all information submitted by the 
reinsured company, including statistical modeling and data * * *''
    Response: FCIC has amended section 400.702(b) accordingly although 
FCIC has substituted the term ``applicant'' in place of ``reinsured 
company'' since any person can provide a submission or proposal to the 
Board.
    Comment: An insurance service organization and three reinsured 
companies expressed concern with the provisions of section 400.703(a) 
in the proposed rule (redesignated 400.703) which state: ``Since 
policies vary in complexity and availability of required data, neither 
FCIC nor RMA make any assurance that approval will be given in time for 
sales in any crop year.'' One commenter stated the provision is 
unnecessary as there is no guarantee a submission will be approved at 
all. Three of the commenters indicated the provision conflicts with the 
minimum requirement for submissions to be received no later than 240 
days prior to the first sales closing date. The commenters stated that 
since this provision sets rigorous time requirements for reinsured 
companies yet does not set such requirements for FCIC, a deadline for 
response from FCIC should be imposed. One reinsured company stated the 
deadline precludes the alteration or expansion of an existing program 
from one year to the next or from one planting season (e.g., spring 
planted crops) to the next (e.g., fall planted crops) and questioned 
when the clock starts and restarts. One reinsured company suggested 
adding language to allow an accelerated time frame to accommodate 
unusual circumstances.
    Response: There is no guarantee that a submission will be approved. 
However, FCIC has determined that the 240 day period is the minimum 
time needed for FCIC to review and evaluate a submission, determine 
actuarial appropriateness, obtain an opinion of legal sufficiency, 
obtain Board approval, and to make a Board approved submission 
available to all insurance providers for the upcoming crop year. The 
time period is intended to provide sufficient time for review and 
approval of most submissions. However, there may be instances where 
program complexities, data availability or dispute between FCIC and the 
applicant delay the review and approval process. FCIC has revised the 
section to clarify the priority that will be used to review 
submissions. Unusual circumstances will be addressed on a case-by-case 
basis.
    Comment: An insurance service organization states that the 
requirement in section 400.703(b) of the proposed rule (redesignated as 
section 400.705(d)) for six copies suggests a submission must be 
provided in hard copy format. The service organization requested 
clarification as to acceptability of submitting electronically, or on 
computer diskette as is indicated in section 400.707(d)(6)(ii) 
(redesignated as 400.707(d)(5)).
    Response: Sections 400.705(d) and 400.707(d)(5) have been revised 
to allow for electronic submission or on computer diskettes.
    Comment: A reinsured company suggested that the language in the 
introductory text of section 400.705 of the proposed rule which states: 
``at a minimum, it must include the following identified material * * 
*'', could be deleted as that language is also repeated in section 
400.705(a).
    Response: FCIC has deleted the introductory text of section 400.705 
of the proposed rule.
    Comment: A reinsured company stated the minimum submission 
requirements contained in section 400.705(a) of the proposed rule 
constitutes a list of information, statements and product documentation 
that will require a thorough development process and review. This will 
require that the submitting company invest an enormous amount of 
capital but provides no commercial incentive or ownership of the 
product if the submission is approved and all supplementary information 
becomes available to the public under the provisions of section 
400.708(a) and (b) of the proposed rule (redesignated as

[[Page 38539]]

400.708(b) and (c)). The reinsured company suggested that FCIC, which 
does not release such complete information for FCIC products and 
programs, should follow the same guidelines required of the submitting 
company, including public disclosure.
    Response: When applicants voluntarily submit proposals, development 
and review of such proposals may require a large expenditure of 
resources. However, it is Congress that has determined that the 
information be released to the public once the proposal has been 
approved by the Board. Congress has imposed no such requirement on 
FCIC. Further, unless specifically exempted, much of the information 
compiled by FCIC in the development of its products is available to the 
public under the Freedom of Information Act. Therefore, no change has 
been made.
    Comment: An insurance service organization requested clarification 
in the language contained in section 400.705(a)(10). An insurance 
service organization asked what ``circumstances'' might change and how 
would the applicant know in order to develop procedures to accommodate 
such changes.
    Response: FCIC has revised this section to specify that any subsidy 
paid will be limited to an amount authorized by law.
    Comment: An insurance service organization recommended combining 
the provisions contained in section 400.705(a)(11) with those contained 
in section 400.705(a)(11)(i) because there is no section 
400.705(a)(11)(ii).
    Response: FCIC has deleted section 400.705(a)(11) (i)(A) through 
(H) of the proposed rule and reformatted section 400.705(a). These 
provisions that were duplicative with other provisions were removed. 
The remainder were incorporated into other more appropriate areas of 
the section.
    Comment: A reinsured company expressed concern in the proposed 
language contained in section 400.705(a)(11)(i)(J)(1) of the proposed 
rule (redesignated as section 400.705(a)(12)(i)) that requires the 
submission to identify the parties and responsibilities for addressing 
the policy and procedural issues and questions that arise in 
administering the approved program. The commenter stated that once the 
program is approved, FCIC becomes the responsible party for those 
areas. FCIC assumes that responsibility with the approval of the 
program, and it becomes an FCIC program the same as MPCI or GRP or any 
other FCIC approved or designed crop insurance program.
    Response: Section 508(h) of the Act only requires FCIC to provide 
reinsurance and risk subsidy, if appropriate, and publish the policy in 
the Federal Register once it is approved. None of these activities 
results in FCIC, as the reinsurer, assuming liability or ownership for 
the approved policy or being solely responsible for addressing policy 
and procedural issues and questions that arise in administering the 
approved program. This responsibility resides with the party who 
assumes the obligation. However, FCIC will assist in resolving such 
issues and then provide the information to other insurance providers. 
Therefore, no change has been made.
    Comment: An insurance service organization and two reinsured 
companies recommended deleting the provisions contained in section 
400.705(a)(11)(i)(J)(2) of the proposed rule (redesignated as section 
400.705(a)(12)(ii)). Two of the commenters stated the reason for an 
approval process is for FCIC to assess the liability of a new product 
and that if FCIC intends to avoid any product or legal liability, there 
seems to be no reason for such an approval process. One commenter 
stated the party responsible for product liability including flaws in 
product design must be FCIC; otherwise the FCIC approval process is 
meaningless. Upon the approval of the program, the program becomes an 
FCIC program.
    Response: Before FCIC can approve a private submission under 
section 508(h) of the Act, it must determine that the interests of 
producers are adequately protected and that premiums charged to the 
producers are actuarially appropriate. However, this submission usually 
involves new and innovative products for which FCIC has no experience 
and, therefore, FCIC must rely on the information provided by the 
applicant. FCIC uses its best judgment in evaluating and approving 
these products but the ultimate responsibility for product design, 
rating, and development of procedures remains with the submitter. 
FCIC's role is only as a reinsurer of these submissions. Therefore, 
since designed by the applicant, the liability for flaws in the design 
remain with the applicant. Approval for reinsurance does not convert a 
submission to an FCIC program. Therefore, no change has been made.
    Comment: A reinsured company suggested that the annual reviews 
required by section 400.705(a)(11)(i)(K) of the proposed rule 
(redesignated as section 400.705(a)(13)) should be conducted by FCIC 
since after approval of the submission, it is an FCIC program.
    Response: As stated in the previous response, FCIC, as a reinsurer, 
does not assume responsibility or ownership for private crop insurance 
policies submitted and approved for FCIC reinsurance under section 
508(h) of the Act. The applicant submitting the policy is responsible 
for establishing performance goals for the policy and to conduct annual 
reviews to determine if such goals are being met. Based on these 
reviews, the applicant is responsible for making changes to the policy 
to meet the established goals. As a reinsurer for these types of crop 
insurance policies, FCIC will monitor their performance to revise 
reinsurance terms or to withdraw approval if necessary. In addition, if 
assistance is requested, FCIC will assist the applicant in correcting 
identified problems. Therefore, no change has been made.
    Comment: An insurance service organization and a reinsured company 
recommended that dates be established in section 
400.705(a)(11)(i)(K)(3) of the proposed rule (redesignated as section 
400.705(a)(13)(iii)). Both commenters suggested that the dates and 
language established in the Memorandum of Understanding be utilized. 
The commenters indicated the Memorandum of Understanding states that 
the insurance provider shall submit annual rate evaluations and any 
suggested program improvements for the following crop year to FCIC by 
July 1 of each year for spring-planted crops and by March 1 for fall-
planted crops. In the event of unforeseen circumstances, the commenters 
recommended that changes may be submitted to FCIC after the July 1 and 
March 1 deadlines, so long as they are submitted not later than 30 days 
prior to the contract change date.
    Response: The Memorandum of Understanding provides the 
responsibilities of FCIC and the submitter and does establish the dates 
by which certain materials must be provided to FCIC. However, not every 
submission will require a Memorandum of Understanding and not all will 
require the same dates so flexibility must be maintained. 
Notwithstanding the dates in the Memorandum of Understanding or 
provided by the submitter under this rule, if there is a flaw in the 
policy that requires a change, such change may be submitted to FCIC at 
any time prior to the contract change date. Therefore, no change has 
been made.
    Comment: An insurance service organization and a reinsured company 
recommended that the provisions in

[[Page 38540]]

section 400.705(a)(12)(i) of the proposed rule (redesignated as section 
400.705(a)(14)(i)) be deleted. Both commenters expressed concern that 
if RMA enforces the requirement of ``sample survey results from 
producers, producer groups, agents, lending institutions, and other 
interested parties,'' approval will be impossible. One commenter 
questioned who will define ``sample survey'' and if the definition 
would be changed ``from day to day.'' In addition, both commenters 
recommended deleting the provision because an unofficial survey may not 
be credible and a professional survey would be cost-prohibitive.
    Response: Before FCIC can dedicate resources to a submitted 
product, FCIC must be assured there is adequate need and interest for 
the product submitted. FCIC has changed ``sample survey'' to ``market 
research'' for clarification. This does not require a professional 
market research but one that provides a summary of the groups or 
persons contacted, the number of persons or groups responding, and the 
results of the research so that the demand for the submitted product 
can be verified.
    Comment: An insurance service organization and a reinsured company 
stated the language contained in section 400.705(a)(14) of the proposed 
rule (redesignated as section 400.705(a)(16)) that requires an 
``explanation of those provisions not authorized under the Act and the 
premium apportioned to those provisions'' substantiates the concern 
that the same submission standards should apply to public and private 
products. The commenters stated the private sector should not be held 
to higher standards than the government and that sales of the MPCI 
program would not have been approved if FCIC had to meet those same 
requirements.
    Response: This is not an issue of the private sector being held to 
a higher standard than those imposed on the MPCI program. Programs 
offered by FCIC must be in compliance with all provisions of the Act. 
Congress has relaxed the requirement for section 508(h) submissions, 
and allows the private sector to offer products not otherwise 
authorized under the Act. FCIC is only requiring the applicant to 
explain any provision contained in the submission that are not 
authorized under the Act. Further, since Congress has limited the 
amount of risk subsidy to an amount authorized under the MPCI program, 
FCIC needs an explanation of the premium apportioned to any aspect of 
the submission not authorized under the Act. An example could be a 
provision that provides a daily rate for rental of equipment in the 
event the producers equipment is inoperable. Therefore, no change has 
been made.
    Comment: An insurance service organization questioned if the word 
``stochastic'' contained in section 400.705(b)(3)(ii) meets the 
readability guidelines. The commenter suggested that it may be helpful 
to add a parenthetical definition or replace the term with 
``statistical'' or ``probability.''
    Response: FCIC has added a definition of stochastic.
    Comment: An insurance service organization and two reinsured 
companies stated the language contained in section 400.705(b)(5) 
created standards that are too high to attain. Two commenters indicated 
certification need only meet current industry standards and suggested 
the language should read: ``A certification that the submission is 
consistent with sound insurance principles, practices, and requirements 
of the Act.'' Both reinsured companies stated it is difficult, if not 
impossible, to find uninterested third parties who are qualified to 
review crop insurance. One reinsured company stated that FCIC does not 
require its employees who develop rates and policies to hold an 
associate or fellow of the Casualty Actuarial Society (CAS) designation 
and should not require it of a private submission. This commenter also 
indicated that paid certifications by CAS designees or a graduate 
degree economist does not demonstrate much more than an extra 
expenditure of time and money. All commenters expressed concerns that 
RMA should not require submissions to provide more certification or 
review than RMA does on its current product inventory.
    Response: FCIC does not believe more stringent requirements are 
being placed on private submissions. FCIC's premium rating methodology 
has been evaluated by a private actuarial firm. This firm has 
determined that FCIC's rating methodologies are consistent with sound 
insurance principles, practices, and requirements of the Act. Given the 
problems that have arisen between FCIC and applicants with respect to 
the submission of rates, FCIC determined that it is prudent to have the 
methodology review by trained, disinterested parties. Especially since 
the terms of reinsurance must be based, in part, on the quality of the 
evidence submitted. Therefore, no change has been made.
    Comment: An insurance service organization and two reinsured 
companies recommended deleting section 400.705(c)(4) of the proposed 
rule (redesignated as section 400.705(c)(2)) that requires statements 
from at least three commercial reinsurers or reinsurance brokers 
regarding the availability of commercial reinsurance. Each of the 
commenters stated there is no purpose in going through the formalities 
of acquiring statements from reinsurance brokers regarding the 
availability of commercial reinsurance because if a proposed product 
was insurable in the commercial sector, a company would not submit it 
to FCIC. One reinsured company suggested that if FCIC is concerned 
whether the submitting company has the capacity to write the proposed 
amount of policies, a reinsurance plan utilizing the company's own 
capacity and reinsurance would be reasonable.
    Response: There may be cases where a commercial reinsurance market 
may exist but the applicant merely is attempting to obtain better terms 
from the Government. FCIC has revised section 400.705(c) so that this 
requirement is not mandatory but FCIC may require such information if 
it suspects that a commercial market exists. The clause ``* * * and, if 
applicable, any past insurance experience of the submission or similar 
crop program'' has been deleted because it is contained in section 
400.705(a)(15).
    Comment: A reinsured company recommended that the rules proposed in 
section 400.706 contain provisions that RMA will provide the submitting 
applicant an acknowledgment within 30 days of receipt, an inventory of 
minimum requirements, a time line of its review process, a list of the 
responsible parties, and a contact person who is knowledgeable of the 
submission.
    Response: Since this rule contains the minimum requirements for a 
submission and the documents are submitted by the applicant, an 
inventory is not necessary. Acknowledgment is not needed since the 
submitter retains a proof of submission. The contact person is the 
submission addressee until FCIC notifies the submitter of other 
responsible parties. Since the information contained in the documents 
may need corrections or clarifications before FCIC can complete its 
review, a time line cannot be included at this date.
    Comment: A reinsured company and an insurance service organization 
suggested that the provisions of section 400.707(b) include language to 
ensure that the Manager convenes the Board in time to meet all 
deadlines contained in the proposed regulation. Both commenters 
suggested Board meetings

[[Page 38541]]

be scheduled one year in advance to assure that a submission would not 
fail to gain approval because the Board did not meet in time to meet 
FCIC's deadlines.
    Response: Since FCIC cannot predict when a submission will be 
received and the time required to prepare the submission for the Board, 
it cannot set a Board meeting date. If the submission is submitted 
timely and contains all information required by this rule, there should 
be no problem in scheduling a Board meeting to approve or disapprove 
the submission. Therefore, no change has been made.
    Comment: An insurance service organization and a reinsured company 
stated the language contained in section 400.707(d)(3) of the proposed 
rule (redesignated as 400.708(a)(1)) that requires a Memorandum of 
Understanding to be in place at least 60 days before the earliest crop 
sales closing date was in reverse order. Each of the commenters 
indicated that FCIC will not sign a Memorandum of Understanding before 
the Board has approved the product, thus the Memorandum of 
Understanding will follow the approval, not precede it.
    Response: The Memorandum of Understanding should follow Board 
approval and the provisions have been revised accordingly. Within 30 
days of Board approval, the Memorandum of Understanding should be 
completed, which will provide approximately 60 days for marketing the 
product. These provisions have been modified and moved to section 
400.708(a)(1) for clarification.
    Comment: Two reinsured companies and an insurance service 
organization expressed concerns about the provisions of section 
400.707(d)(4) of the proposed rule (redesignated as 400.707(d)(3)). The 
commenters stated the provision gives FCIC the authority to make 
changes at the last minute, despite the requirements for timeliness 
imposed on the company. The commenters indicated that when FCIC 
requires an adjustment, it should follow the deadlines set out 
elsewhere in the proposed rule. The insurance service organization 
questioned if FCIC's Board will only approve the submission if the 
applicant ``agrees to make any adjustment FCIC may suggest,'' and 
whether these suggestions will be separated into ``substantive'' and 
``non-substantive'' categories, with the applicant not having to accept 
the non-substantive suggestions in order to get approval. One reinsured 
company suggested this statement would be more accurate if it stated 
the Board will not approve any submission unless the policy, procedures 
or other related material meet FCIC's approval. The reinsured company 
stated this would reinforce that FCIC's approval is conditioned on its 
approval of all aspects of the program, further defining that any 
approved program is an FCIC program.
    Response: Section 400.707(d)(3) does not give FCIC the right to 
make last minute or untimely changes or adjustments to the submission 
and is not intended to force the applicant to make all changes FCIC may 
suggest. Before the Board can approve a submission for reinsurance 
under section 508(h) of the Act, the Board is required to determine 
that the rights of producers are adequately protected and that any 
premiums charged to the producers are actuarially appropriate. Any 
recommended changes to make the submission conform with these 
requirements will be considered as substantive changes and must be 
incorporated into the submission before it can be approved. FCIC will 
inform the applicant of any such change as soon as possible during 
FCIC's review of the submission. Suggested changes to the submission 
should be separated into ``substantive'' and ``non-substantive'' 
categories and FCIC has revised section 400.707(d)(3). Failure of the 
applicant to incorporate non-substantive changes will not serve as a 
basis for the Board to disapprove the submission. However, FCIC will 
work with the applicant to resolve all issues during FCIC's review of 
the submission. As stated in a previous response, although the Board 
may approve a submission, FCIC as a reinsurer, does not assume sole 
responsibility or ownership for private crop insurance policies 
submitted.
    Comment: An insurance service organization questioned if the time 
frame provided in section 400.707(d)(6)(i) of the proposed rule is 
sufficient for the applicant to market the new program, since policies 
and related forms must be available to producers at least 30 days 
before the earliest sales closing date.
    Response: The 30 days before the sales closing date cited by the 
commenter refers to carry-over insureds, of which there are none for a 
new product. FCIC realizes the importance of having sufficient sales 
time for the product. If the review is completed, FCIC will forward the 
recommendation to the Board at least 90 days before the first crop 
sales closing date. Within 30 days of Board approval, the reinsurance 
agreement should be completed which will provide approximately 60 days 
for marketing the product. These provisions have been modified and 
moved to section 400.708(a)(2) for clarification.
    Comment: An insurance service organization and a reinsured company 
suggested the references to rates and rating procedures contained in 
section 400.707(d)(6)(ii) of the proposed rule (redesignated as 
400.707(d)(5)) need clarification and suggested adding language to 
require definitions for the determination of each variable used in 
rating.
    Response: FCIC has added the phrase ``defining each variable used 
in any rating formulae'' after rates.
    Comment: A reinsured company commented that the provisions of 
section 400.707(e) indicates the Board may disapprove submissions if 
all specified requirements are not met. The commenter questioned the 
purpose of a submission being provided to Research and Development 
staff if the Board will be presented and charged with determining if a 
submission does or does not meet all requirements. The commenter stated 
the Board should not be tasked with review of all minute details, it 
should only receive for consideration submissions that fulfill all 
requirements.
    Response: FCIC staff do not have the authority to approve or 
disapprove a submission. Staff will make a recommendation to the Board, 
but the Board ultimately decides whether producers are adequately 
protected and rates are actuarially appropriate. Therefore, no change 
has been made.
    Comment: An insurance service organization and a reinsured company 
suggested that the language in section 400.707(e)(1) be changed to 
state: ``Such notice will contain the basis for approval, and will 
include recommended changes necessary for Board approval.'' The 
insurance service organization also questioned how provisions that 
state the Board will notify the applicant of disapproval ``not later 
than 30 days prior to taking such action will fit into the overall time 
frame when section 400.703(a) (redesignated as 400.703) states a 
minimum of 240 days before the first sales closing date is to be used 
for marketing as well as for review and approval. The commenter ask if 
the language ``not later than 30 days prior'' means more than 30 days 
before official disapproval, or within that 30 day period and suggested 
the language be revised to ``at least 30 days prior.''
    Response: FCIC may not know what changes may be required to obtain 
Board approval. Therefore, the provision must provide FCIC with the 
discretion to provide recommendations when known. FCIC has revised the

[[Page 38542]]

provision to state ``at least 30 days prior.''
    Comment: A reinsured company suggested that the provisions of 
section 400.708(b) be clarified to indicate that any solicitation, 
sales, marketing or advertising before FCIC has made the material 
available to all interested parties through its official issuance 
system will result in denial of reinsurance, risk subsidy, and 
administrative and operating (A&O) subsidy for the first approved crop 
year for the party which solicited, sold, marketed or advertised early.
    Response: FCIC has clarified that any solicitation, sales, 
marketing, or advertising of the program before FCIC has made the 
submission and related materials available to all interested parties 
through its official issuance system will result in the denial of 
reinsurance, risk subsidy, and A&O subsidy for such policies.
    Comment: A reinsured company and an insurance service organization 
recommended changing the wording ``full subsidy'' contained in section 
400.710 to ``subsidy.''
    Response: The term full subsidy meant the maximum risk subsidy and 
A&O subsidy allowed under the Act. An applicant may request less than 
the maximum allowable subsidies. FCIC has revised the provision to 
specifically refer to risk and A&O subsidy.
    Comment: An insurance service organization and a reinsured company 
questioned the applicability of the provisions contained in section 
400.711 that allow the Board at any time after approval to request 
additional information, require appropriate amendments, revisions or 
program changes for the purpose of actuarial soundness or program 
integrity. Both commenters stated those changes should be made by FCIC 
because the program is an FCIC program after approval. The insurance 
service organization recommended clarification of the provision because 
the approval process should be thorough enough that such cases are rare 
and there is nothing that indicates whether such reviews, requests and 
requirements would be effective for the subsequent crop year or whether 
approval could be revoked retroactively. The service organization 
recommended the Board's approval be effective for at least the first 
year.
    Response: As stated above, approval of a submission does not 
convert it to an FCIC program. Further, if problems arise during the 
crop year, FCIC may need to take corrective action immediately for the 
purpose of maintaining actuarial soundness of the program, program 
integrity, or protection of the interests of producers. If this 
situation arises, FCIC will work closely with the applicant to 
determine the appropriate corrective actions to be taken. Therefore, no 
change has been made.
    Comment: Two reinsured companies and an insurance service 
organization expressed concern about the standards set forth in the 
proposed regulation. All commenters stated that FCIC appears to have 
approval authority over submissions but takes no responsibility for 
those programs approved by the Board. The commenters suggested that if 
FCIC approves a submission, then FCIC must be the regulator, manager, 
maintainer and administrator of that program. In this role, FCIC will 
accomplish what was intended by the Act by providing a process and 
mechanism under which organizations, in addition to FCIC, can design 
programs that are needed in the marketplace and make them available to 
producers under the FCIC product umbrella. All commenters stated that 
if FCIC is not willing to assume that role, then submissions should not 
be approved.
    Response: Section 508(h) of the Act was enacted for the sole 
purpose to allow private insurance companies to create and manage their 
own crop insurance policies. FCIC's only role in these private programs 
is to provide financial assistance if FCIC determines that the 
interests of producers are adequately protected and that any premiums 
charged to the producers are actuarially appropriate. There is nothing 
in the Act which states that the submission must be made available 
``under the FCIC product umbrella.'' FCIC need only publish the policy 
and disseminate information produced by the applicant. This is fully in 
keeping with the intent of the Act. As stated in a previous response, 
FCIC does assume the responsibility of a regulator because the 
submission is approved by FCIC for financial assistance with taxpayers' 
funds. The approval process is necessary to assure that taxpayers' 
dollars are supporting a sound crop insurance product. Therefore, no 
change has been made.
    In addition to the changes described above, FCIC has made minor 
editorial changes and has amended the following:
    1. Section 400.700(d) has been clarified to specify those 
provisions of the Act that are not applicable under section 508(h).
    2. Section 400.701--Amended the definitions of ``person,'' `` 
replacement program,'' ``submission,'' and ``supplemental program'' for 
clarification.
    3. Section 707(d)(5) has been redesignated as section 707(d)(4).
    4. Section 400.708(a) has been redesignated as section 400.708(c).
    5. Section 400.709(b) has been revised to clarify the changes that 
are considered material.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedures, Claims, Crop insurance, 
Reporting and recordkeeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation hereby amends the General Administrative 
Regulations (7 CFR part 400) by adding subpart V as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart V--Submission of Policies, Provisions of Policies and Rates 
of Premium

Sec.
400.700  Basis, purpose, and applicability.
400.701  Definitions.
400.702  Confidentiality of submission.
400.703  Timing of submission.
400.704  Type of submission.
400.705  Contents of submission.
400.706  FCIC review.
400.707  Presentation to and review by the Board for approval or 
disapproval.
400.708  Approved submission.
400.709  Review of an approved program.
400.710  Preemption and premium taxation.
400.711  Right of review, modification, and amendment.

    Authority: 7 U.S.C. 1506(1), 1506(p).

Subpart V--Submission of Policies, Provisions of Policies and Rates 
of Premium


Sec. 400.700  Basis, purpose, and applicability.

    (a) The Act requires FCIC to issue regulations that establish 
guidelines for the submission of policies or other material to the FCIC 
Board under section 508(h) of the Act. These guidelines prescribe the 
timing, submission and approval process so that the Board may timely 
consider any submission for approval and, if approved, make it 
available for sale to producers by any approved insurance provider in 
the first crop year that the submission is authorized for reinsurance, 
subsidy, or other financial support that may be available under the 
Act. These guidelines also authorize FCIC and the Board to monitor the 
submission to ensure continued compliance with the requirements of the

[[Page 38543]]

Act, this subpart, and changes required by the Board.
    (b) These regulations apply to all applicants.
    (c) An applicant may submit for consideration by the Board:
    (1) Crop insurance policies that are not currently reinsured or 
subsidized by FCIC;
    (2) Provisions of policies that may amend existing crop insurance 
policies that are approved by FCIC; or
    (3) Rates of premiums for MPCI policies pertaining to wheat, 
soybeans, field corn, or any other crop authorized by the Secretary of 
Agriculture.
    (d) A policy or other material submitted to the Board under section 
508(h) of the Act may be prepared without regard to the limitations 
contained in the Act. Only the provisions in the Act directly relating 
to the terms of the insurance policy, such as coverage, premium rates, 
or price elections, are considered as the limitations referenced in 
section 508(h) of the Act.
    (e) Any FCIC payment of a portion of the premium may not exceed the 
amount authorized under section 508(e) of the Act, and payment of 
administrative and operating expense subsidy may not exceed the amount 
authorized under section 508(d).


Sec. 400.701  Definitions.

    Act. The Federal Crop Insurance Act (7 U.S.C. 1501 et seq.).
    A&O subsidy. The subsidy for the administrative and operating 
expenses authorized by the Act and paid by FCIC on behalf of the 
producer to the insurance provider.
    Applicant. Any person who submits a policy, provisions of a policy, 
or premium rates to the Board for approval under section 508(h) of the 
Act.
    Board. The Board of Directors of FCIC.
    FCIC. The Federal Crop Insurance Corporation, a wholly owned 
government corporation within the United States Department of 
Agriculture.
    Insurance provider. A private insurance company that has been 
approved by FCIC to provide crop insurance coverage under the Act.
    Manager. The Manager of FCIC.
    MPCI. The FCIC multiple peril crop insurance policies authorized 
under the Act and codified in 7 CFR chapter IV.
    NASS. National Agricultural Statistics Service, an agency of the 
United States Department of Agriculture, or a successor agency.
    Person. Any individual or legal entity possessing the capacity to 
contract.
    Policy. A crop insurance contract between a person and an insurance 
provider, consisting of the accepted application, the applicable policy 
provisions and endorsements, if applicable, and the applicable 
actuarial material for the insured crop.
    Rate of premium. The dollar amount per insured unit or percentage 
rate per dollar of liability that is needed to pay expected losses and 
provide for a reasonable reserve.
    Replacement program. A crop insurance program that provides 
coverage at least equal to that provided under the MPCI program with 
similar terms, conditions, and covered causes of loss approved by the 
Board under the authority of section 508(h) of the Act.
    Revenue insurance. Plans of insurance providing protection against 
loss of income, which are designated as such by FCIC.
    Risk subsidy. That portion of the FCIC approved insurance premium 
for the risk of loss paid by FCIC on behalf of the policyholders to the 
insurance provider.
    Secretary. The Secretary of the United States Department of 
Agriculture.
    Stochastic. A randomly determined sequence of observations, each of 
which is considered as a sample of one element for a probability 
distribution.
    Submission. Any policy provisions, rates of premium, and related 
material submitted to FCIC that differs from the present MPCI program 
or replacement programs or that request a material change in an 
existing insurance program.
    Supplemental program. A submission requesting reinsurance only that 
provides coverage in addition to, and is written concurrently with, an 
MPCI policy or a replacement program.


Sec. 400.702  Confidentiality of submission.

    (a) A submission made to the Board under section 508(h) of the Act 
will be considered as confidential, commercial, or financial 
information for purposes of 5 U.S.C. 552(b)(4) until approved by the 
Board. An applicant may waive such confidentiality by advising FCIC in 
writing, or by releasing such information to a person or entity other 
than FCIC.
    (b) Once a submission is approved, all information provided by the 
applicant to the Board, including statistical modeling and data, will 
be made public.
    (c) Any submission disapproved by the Board will remain 
confidential, commercial, or financial information in accordance with 5 
U.S.C. 552(b)(4).


Sec. 400.703  Timing of submission.

    Any submission for Board review must be received not later than 240 
days prior to the first sales closing date for which sales are 
requested for a crop to provide adequate time for review, approval, and 
marketing of the program. If the submission applies to more than one 
crop, the earliest applicable crop sales closing date controls. 
However, any submission received by FCIC less than 240 days prior to 
the first sales closing date may be considered if all parties agree the 
submission can be reviewed, approved, and information disseminated to 
insurance providers in a timely manner without creating excessive risk 
and exposure to the crop insurance program or disruptions in the market 
place. Such a submission must meet all statutory requirements, 
specifically that the approved submission can be made available to all 
persons reinsured by FCIC in a manner permitting the persons to 
participate in the sales of the product in the first crop year for 
which it is approved by the Board for reinsurance, premium subsidy, or 
other support offered by the Act. Otherwise, the submission will be 
considered for the subsequent crop year. Since submissions vary in 
complexity and availability of required data, FCIC makes no assurances 
that approval will be given in time for sales in any crop year. In the 
event FCIC receives more submissions than it can process for an 
upcoming crop year, the date received, complexity, and completeness of 
the submission will determine when FCIC's review of the submission will 
be initiated and the crop year for which the submission is approved.


Sec. 400.704  Type of submission.

    An applicant may submit to the Board:
    (a) Policies and related material identified as one of the 
following types:
    (1) A supplemental program;
    (2) A replacement program; or
    (3) Any other submission authorized under section 508(h) of the Act 
but not classified by paragraphs (a) and (b) of this section.
    (b) One or more proposed revisions of any MPCI policy, revenue 
insurance policy, or any other policy approved by the Board; and
    (c) Premium or rates of premiums for MPCI policies.


Sec. 400.705  Contents of submission.

    (a) Each submission may contain any information that the applicant 
wishes to provide but, at a minimum, must include the following 
material:
    (1) Applicant's name;
    (2) Type of submission;
    (3) Proposed crops, types, varieties, or practices, as applicable, 
to be covered by the submission;
    (4) Geographical areas in which the submission will be applicable;

[[Page 38544]]

    (5) Potential crop acreage, production, and liability that could be 
written (estimated by crop and state);
    (6) Percentage of the crop acreage, production, and liability that 
is expected to be written (estimated by crop and state);
    (7) Crop year in which the submission is proposed to be effective;
    (8) Proposed duration of the approval, if applicable;
    (9) A statement of the applicant's intent to expand the program in 
future crop years to different geographical areas or crops, types, 
varieties, or practices, as applicable;
    (10) A statement of whether the applicant is requesting 
reinsurance, risk subsidy, or A&O subsidy for the submission, and if 
so, the proposed methods of calculating the risk subsidy or A&O subsidy 
(The allowable subsidies cannot exceed the amount authorized by law);
    (11) A determination whether:
    (i) The submission will be filed with the applicable Commissioner 
of Insurance for each state proposed for sales, and if not, the reasons 
such submission will not be forwarded for review by the Commissioner; 
and
    (ii) The submission complies in all material respects with the 
standards established by FCIC for processing and acceptance of data as 
specified in its Manual 13 ``Data Acceptance System Handbook,'' unless 
FCIC has agreed otherwise as part of the development process (This 
handbook is available from the Actuarial Division, P.O. Box 419293, 
Kansas City, MO 64141);
    (12) Identification of:
    (i) Parties responsible for addressing the policy and procedural 
issues and questions that may arise in administering the approved 
program; and
    (ii) Parties responsible for the product liability and the basis 
for such responsibility including liability for flaws in product design 
if such results in litigation against the applicant or FCIC;
    (13) Procedures for annual reviews to ensure compliance with all 
requirements of the Act, this subpart, and any agreements executed 
between the applicant and FCIC:
    (i) The title of the person responsible for completing each task;
    (ii) The date by which each task will be completed; and
    (iii) The date by which the information or documents will be made 
available to FCIC, the policyholder, other insurance providers, or the 
Commissioner of Insurance, if applicable (Policy information, forms and 
other related documents must be made available to the producer at least 
30 days prior to the earliest crop sales closing date for the crops to 
which the submission applies.);
    (14) A description of the benefits of the submission:
    (i) To producers that demonstrate how the submission offers 
coverages or costs that differ significantly from existing programs and 
that such coverage is generally not available from the private sector 
(Such descriptions should be supported by market research results from 
producers, producer groups, agents, lending institutions, and other 
interested parties, which should also include a summary of those 
persons or organizations contacted and the number of persons or 
organizations responding) that provides verifiable evidence of the 
demand for the submitted product; and
    (ii) To taxpayers that demonstrate how the submission meets the 
public policy goals and objectives as stated in the Act, the statements 
of the Secretary, or similar officials and laws (This must include the 
rationale and data supporting the request for FCIC's financial 
commitment to the submission);
    (15) Any accumulated insurance experience from all years and in all 
states in which the submission has been offered for sale and a 
comparison of the submission's performance with other crop insurance 
programs; and
    (16) An explanation of those provisions not authorized under the 
Act and the premium apportioned to those provisions.
    (b) With respect to any submission that impacts the amount of 
premium charged to the producer, the applicant must provide with the 
submission:
    (1) A detailed description of the rating methodology, including all 
mathematical formulae and equations used in determining all 
unsubsidized and subsidized premiums or rates of premium;
    (2) A list of the assumptions used in the formulation of the 
premiums or rates of premium;
    (3) Simulations of the performance of the proposed premiums or 
rates of premium based on one or more of the following:
    (i) By determining the total premiums and anticipated losses that 
would be paid under the submission and comparing these totals to a 
comparable insurance plan offered under the authority of the Act (Such 
simulations must use all experience available to the applicant and must 
include at least one year in which indemnities for the submission and 
the comparable crop exceed total premiums);
    (ii) By means of a stochastic simulation of the submission that is 
based on the same assumptions as those used to develop the premiums or 
rates of premium, including sensitivity tests with regard to each 
assumption that demonstrates the probable impact of an erroneous 
assumption; or
    (iii) By means of any simulation that can be proven to provide 
results comparable to those described in paragraphs (b)(3)(i) and (ii) 
of this section;
    (4) Worksheets that provide the calculations in sequential order 
and in sufficient detail to allow verification that the premiums 
charged for the coverage are consistent with policy provisions (Any 
unique premium component must be explained in sufficient detail to 
determine whether the existence or amount of the premium or premium 
rate is appropriate); and
    (5) A certification that includes, but is not limited to, an 
evaluation of all supporting documentation and analysis from an 
accredited associate or fellow of the Casualty Actuarial Society or a 
similar uninterested third party who did not participate in the primary 
development, or peer review panel or both. The evaluation must 
demonstrate that the submission is consistent with sound insurance 
principles, practices, and requirements of the Act.
    (c) With respect to those submissions that involve new crop 
insurance programs or revision of an existing crop insurance program:
    (1) The applicant must provide with the submission:
    (i) An application and related policy forms together with the 
instructions for completing and processing such forms;
    (ii) The insurance policy provisions;
    (iii) A sample of the actuarial documents;
    (iv) The underwriting rules, including but not limited to:
    (A) The procedures for accepting the application;
    (B) The rules for determining program eligibility, including but 
not limited to, minimum acreage, premium requirements, sales closing 
dates, production reporting requirements, and inception or termination 
dates of the policy;
    (C) The application of administrative fees as required by the Act;
    (D) A description of available options that are different from any 
existing crop insurance program;
    (E) Any information needed to establish coverage and determine 
claims, including prices that must be made available during the 
insurance period (This information must specify how and when such 
determination is

[[Page 38545]]

made and that the process is in compliance with policy provisions);
    (F) Any other applicable underwriting requirements that may be 
required by FCIC; and
    (G) The agent training plans;
    (2) The applicant may be required to submit statements from at 
least three commercial reinsurers or reinsurance brokers regarding the 
availability of commercial reinsurance, the amount of commercial 
reinsurance available, and the proposed terms of reinsurance;
    (3) Loss adjustment procedures and calculations that include, but 
are not limited to:
    (i) Procedures that clearly specify the methods for determining the 
existence of and the amount of any payable loss under the submission 
and that demonstrate that such determinations are consistent with 
policy provisions; and
    (ii) Examples and worksheets that provide the steps for calculating 
the amounts of any payment for indemnity (loss in yield or price), 
prevented planting payment or replant payment in sequential order and 
in sufficient detail to allow review and verification that the 
indemnity calculations are consistent with policy provisions. Any 
unique component must be explained in sufficient detail to determine 
whether the existence or amount of the claim is appropriate;
    (4) A detailed calculation for determining commodity prices, 
coverage levels, the amounts of insurance, and production guarantees; 
and
    (5) A detailed description of the causes of loss covered and 
excluded under the submission.
    (d) The submission must be sent to the Deputy Administrator, 
Research and Development, Federal Crop Insurance Corporation, 9435 
Holmes Road, Kansas City, MO 64131. The submission must also include 
computer disks or other electronic media in a format acceptable to RMA.


Sec. 400.706  FCIC review.

    Each submission will be reviewed by FCIC to determine if all 
necessary and appropriate documentation is included. The submission may 
be returned to the applicant if it does not comply in all material 
respects with these requirements. Any returned submission must be 
resubmitted in its entirety unless otherwise determined by FCIC.


Sec. 400.707  Presentation to and review by the Board for approval or 
disapproval.

    (a) Upon completion of staff review, all recommendations will be 
forwarded to the Board.
    (b) After scheduling the submission to be presented to the Board, 
the Manager will inform the applicant of the date, time, and place of 
such meeting.
    (c) The applicant will be given the opportunity to present the 
submission to the Board. The applicant must notify FCIC in writing in 
advance of the Board meeting as to whether the applicant will present 
the submission to the Board. If the applicant plans to present the 
submission and fails to appear, or if the applicant requests FCIC to 
present the submission, an FCIC representative will present the 
submission to the Board.
    (d) The Board may consider for approval the submission for sale to 
producers as an additional risk management tool if:
    (1) Producers interests are adequately protected;
    (2) Premiums charged are actuarially appropriate;
    (3) The applicant agrees to make any requested FCIC substantive 
changes in the submission to ensure compliance with the Act and to 
protect the interests of producers and the integrity of the program. 
FCIC will categorize recommended changes in a submission into 
substantive and non-substantive. (Failure of the applicant to 
incorporate non-substantive changes suggested by FCIC will not serve as 
a basis for the Board to disapprove the submission);
    (4) The insurance provider's resources, procedures, and internal 
controls are adequate to make the product available to producers in a 
timely manner in the proposed market areas; and
    (5) The applicant provides rates, defining each variable used in 
any rating formulae, forms, guidelines, standards, actuarial material, 
rating procedures, indemnity procedures, and related documents.
    (e) The Board may disapprove the submission for financial 
assistance if all the requirements of paragraph (d) of this section are 
not met. When the Board indicates its intention to disapprove, it will:
    (1) Notify the applicant in writing of its intent to disapprove the 
submission at least 30 days prior to taking such action (Such notice 
will contain the basis for disapproval, and may include changes 
necessary for Board approval);
    (2) Consider any resubmission as a new proposal and complete the 
review process at a later time; and
    (3) Reserve the right to act upon an applicant's revised submission 
or defer action to a later time or for a subsequent crop year.


Sec. 400.708  Approved submission.

    (a) Within 30 days of Board approval, the following must be 
completed:
    (1) A Memorandum of Understanding or other such agreement between 
the applicant and FCIC that specifies the responsibilities of each with 
respect to the implementation, delivery and oversight of the 
submission, and;
    (2) A reinsurance agreement between FCIC and the applicant that 
specifies the amount of reinsurance coverage, risk subsidy, and A&O 
subsidy, as applicable.
    (b) Any solicitation, sales, marketing, or advertising of the 
program before FCIC has made the submission and related materials 
available to all interested parties through its official issuance 
system will result in the denial of reinsurance, risk subsidy and A&O 
subsidy for those policies in violation of this provision.
    (c) A submission approved by the Board under this subpart will be 
published as a notice of availability in the Federal Register, and be 
made available to all persons contracting with or reinsured by FCIC 
under the same terms and conditions as required of the submitting 
company.


Sec. 400.709  Review of an approved program.

    (a) Responses to procedural issues, questions, problems or needed 
clarification regarding an approved submission shall be jointly 
addressed by the applicant and FCIC. All such resolutions shall be 
communicated to all insurance providers through FCIC's official 
issuance system. Any corrected material must be presented to FCIC in a 
format specified in Sec. 400.705(d).
    (b) Any change causing a material impact upon a submission 
previously approved by the Board must be resubmitted for Board 
consideration and approval. (A material impact is any one that may 
affect the premium charged or liability under the policy.)
    (c) The approved submission will be administered in accordance with 
all terms of the reinsurance agreement, any applicable Memorandum of 
Understanding, or any other requirement deemed appropriate by the 
Board.


Sec. 400.710  Preemption and premium taxation.

    A policy that is approved by the Board for FCIC reinsurance only, 
or FCIC reinsurance and risk and A&O subsidies, and published in the 
Federal Register as a notice of availability is preempted from state 
and local taxation. Any changes to policy provisions requested under 
state and local laws

[[Page 38546]]

and regulations must be submitted to FCIC for review and Board 
approval.


Sec. 400.711  Right of review, modification, and amendment.

    At any time after approval, if sufficient material, documentation 
or cause arises, the Board may review any approved program, request 
additional information, and require appropriate amendments, revisions 
or program changes for purposes of actuarial soundness, program 
integrity or protection of the interests of producers.

    Signed in Washington, DC, on July 12, 1999.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 99-18263 Filed 7-16-99; 8:45 am]
BILLING CODE 3410-08-P