[Federal Register Volume 66, Number 136 (Monday, July 16, 2001)]
[Proposed Rules]
[Pages 36951-36960]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17607]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 66, No. 136 / Monday, July 16, 2001 / 
Proposed Rules  

[[Page 36951]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563-AB84


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

AGENCY: Federal Crop Insurance Corporation.

ACTION: Proposed rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
amend the procedures for the submission of policies, plans of 
insurance, or other rates or premium by insurance companies, or other 
persons or entities, to the FCIC Board of Directors (Board) for 
approval for reinsurance and subsidy under section 508(h) of the 
Federal Crop Insurance Act (Act) (7 U.S.C. 1501 et seq.).
    This rule will prescribe the respective roles and responsibilities 
of FCIC and the submitter. This rule also prescribes guidelines for the 
timing, content, and approval process for policies, plans of insurance, 
and rates of premium submitted under section 508(h) of the Act. In 
addition, this rule establishes requirements and guidelines for the 
reimbursement of research and development costs and maintenance costs 
for such submissions approved by the Board, and the payment of fees by 
insurance companies after the maintenance period has expired. For 
submissions approved by the Board prior to publication of this 
regulation, applicants may either submit documentation of research and 
development costs or use a formula method to determine the amount of 
the research and development reimbursement. The formula presented in 
this regulation is an objective measurement using the average number of 
policies per year earning premium from inception of the product to the 
time this regulation is published times $7 with the result of this 
calculation adjusted for scope and complexity, as required by 
legislation. The $7 was determined by using estimated product 
development costs with the intent to provide research and development 
cost reimbursement on an equitable basis considering the sales life 
cycle to date and market penetration. This rule also provides 
guidelines for non-reinsured supplemental policies to be submitted to 
FCIC for review in accordance with the Standard Reinsurance Agreement 
(SRA).

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business August 15, 2001 and will be considered 
when the rule is to be made final. The comment period for information 
collections under the Paperwork Reduction Act of 1995 continues through 
September 14, 2001.

ADDRESSES: Interested persons are invited to submit written comments to 
the Director, Product Development Division, Federal Crop Insurance 
Corporation, United States Department of Agriculture, 6501 Beacon 
Drive, Stop 0812, Kansas City, MO 64133. Comments titled ``General 
Administrative Regulation; Submission of Policies, Provisions of 
Policies, and Rates of Premium'' may be sent via the Internet to: 
[email protected]. A copy of each response will be available 
for public inspection and copying from 7 a.m. to 4:30 p.m., CST, Monday 
through Friday, except holidays, at the above address.

FOR FURTHER INFORMATION CONTACT: Timothy Hoffmann, Director, Product 
Development Division, Federal Crop Insurance Corporation, at the Kansas 
City, MO, address listed above, telephone (816) 926-3707.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
rule is significant for the purpose of Executive Order 12866 and, 
therefore, it has been reviewed by OMB.

Paperwork Reduction Act of 1995

    In accordance with section 3507(j) of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501), the information collection and record keeping 
requirements included in the proposed rule have been submitted for 
approval to OMB. Please submit written comments to the Desk Officer for 
Agriculture, Office of Information and Regulatory Affairs, Office of 
Management and Budget (OMB), Washington, D.C. 20503. A comment to OMB 
is best assured of having its full effect if OMB receives it within 30 
days of publication of this proposed rule.
    Comments are being solicited from the public concerning this 
proposed information collection and record keeping requirements. This 
outside input will help:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information has practical utility;
    (2) Evaluate the accuracy of our estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumption used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond (such as through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission responses.)
    Title: General Administrative Regulation; Submission of Policies, 
Provisions of Policies, and Rates of Premium.
    Abstract: This rule revises guidelines for the submission of 
policies or other material to the Board under section 508(h) of the 
Act. In accordance with section 508(h) of the Act, this rule 
establishes the process for the submission of policies, plans of 
insurance, and rates of premium, the deadlines for the review and 
approval process by the Board, and the respective roles and 
responsibilities of FCIC and the submitter related to the submission. 
This rule specifies information that must be included in a new or 
revised submission and the format it must be in to be considered for 
Board approval. This rule establishes requirements and guidelines for 
the reimbursement of research and development costs and maintenance 
costs for such submissions approved by the Board and the payment of 
fees by insurance companies after the

[[Page 36952]]

maintenance period has expired. It also requires non-reinsured 
supplemental policies developed by companies reinsured by FCIC to be 
submitted to FCIC for review in accordance with provisions contained in 
the Standard Reinsurance Agreement (SRA).
    Purpose: To amend 7 CFR part 400 by revising subpart V.
    Burden statement: This proposed rule is needed to ensure that the 
Board receives complete submissions that are ready for review and 
approval. It also ensures the fair and equitable distribution of 
limited funds for research and development costs and maintenance costs. 
This proposed rule will ensure an effective, orderly, and efficient 
crop insurance marketplace, and that the Federal crop insurance program 
is delivered to all producers in a manner that does not unfairly 
discriminate among producers or insurance companies.
    The burden associated with this rule, with the exception of reading 
the rule, is in the development and submission of a policy, revision to 
a policy or rates of premium for any policy or plan authorized under 
the Act. FCIC estimates that annually 75 people (excluding Federal 
employees) will spend 2 hours reading this document for a total of 150 
hours (75  x  2 = 150). FCIC estimates people in 14 positions 
(marketing manager, computer manager, financial manager, technical 
writer, actuary, accountant, lawyer, economist, computer programmer, 
underwriter, paralegal, marketing researcher, statistician, and office 
assistant) will respond for a total of 210 respondents (14 positions 
x  15 submissions = 210). FCIC estimates 105 annual responses (15  x  7 
= 105) due to 15 applicants completing seven objectives (preparing the 
submission, modifying the submission, corresponding with the Board, 
preparation and presentation to the Board, responding to issues, 
negotiating agreements, costs and fees and maintenance of approved 
products). To determine approximate annual burden hours, FCIC estimates 
15 entities will prepare a submission (applicants) and will spend the 
following amount of time for each of the seven objectives: (1) 
Preparing and submitting the submission--22,500 hours (15 applicants 
x  1,500 hours = 22,500); (2) Modifying submission prior to Board 
approval--15,000 hours (15 applicants  x  1,000 hours = 15,000); (3) 
Preparation of correspondence between Board and applicant--150 hours 
(15 applicants  x  10 hours = 150); (4) Preparation and presentation of 
the submission to the Board--600 hours ( 15 applicants  x  40 hours = 
600 hours); (5) Responding to procedural, policy, and data automation 
issues subsequent to Board approval--15,000 hours (15 applicants  x  
1,000 hours = 15,000); (6) Negotiation of agreements, costs and fees--
600 hours (15 applicants  x  40 hours); and (7) Maintenance of approved 
products--3,000 hours (15 applicants  x  200 hours = 3,000).
    Estimate of Burden: The public reporting burden for this collection 
of information is estimated to average 543 hours per response.
    Respondents: Insurance Companies, insureds, insurance agents, and 
other persons or entities who may wish to submit policies or policy 
provisions to the Board for approval.
    Estimated Annual Number of Respondents: 210.
    Estimated Annual Number of Responses Per Respondent: 0.5.
    Estimated Annual Number of Responses: 105.
    Estimated Total Annual Burden of Respondents: The total public 
burden for this proposed rule is estimated at 57,000 hours.
    Record keeping requirements: FCIC requires records to be kept for 
three years, and all records required by FCIC are retained as part of 
the normal business practice. Therefore, FCIC is not estimating 
additional burden related to record keeping.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
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 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 UMRA.

Executive Order 13132

    The policies contained in this rule do not have a substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. Additionally, the regulation does 
not require any greater action on the small entities than is required 
on the part of large entities. The amount of work required of the 
insurance companies will not increase because the information must 
already be collected under the present policy. No additional work is 
required as a result of this action on the part of either the insured 
or the insurance companies. Therefore, this action is determined to be 
exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 
605) 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 proposed 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 part 11 or 7 CFR 400.169, as applicable, must be exhausted 
before any action for judicial review of any determination or action by 
FCIC may be brought.

Environmental Evaluation

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

Background

    FCIC makes available standard policies and forms for producers to 
insure certain crops against various agricultural production risks and 
perils. Under the provisions of section 508(h) of the Act (7 U.S.C. 
1501 et seq.), any person may submit or propose other crop insurance 
policies, plans of insurance, provisions of policies, or rates of 
premium. These policies may be submitted without regard to limitations 
contained in the Act.

[[Page 36953]]

    The Act requires that FCIC issue regulations to establish 
guidelines for the submission and Board review of policies or other 
material submitted to the Board under the Act. This rule prescribes 
guidelines for the timing, content, approval process, and the 
reimbursement for research and development costs and maintenance costs, 
and potential use fees for such submissions. This rule also clarifies 
the roles and responsibilities of FCIC and the submitter with respect 
to the submission. This rule also provides guidelines for non-reinsured 
supplemental policies to be submitted to FCIC for review in accordance 
with the SRA.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedures, Crop insurance.

Proposed Rule

    Accordingly, for the reasons set forth in the preamble, the Federal 
Crop Insurance Corporation proposes to amend 7 CFR part 400 by revising 
Subpart V to read 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 and duration of 
confidentiality.
400.703   Timing of submission.
400.704   Type of submission.
400.705   Contents of submission for a new submission or changes to 
a previously approved submission.
400.706   Review of submission.
400.707   Presentation to the Board for approval or disapproval.
400.708   Approved submission.
400.709   Roles and responsibilities.
400.710   Preemption and premium taxation.
400.711   Right of review, modification, and the withdrawal of 
reinsurance.
400.712   Research and development reimbursement, maintenance 
reimbursement, and use fees.
400.713   Non-reinsured supplemental (NRS) policy

    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.

    This subpart v establishes guidelines for the submission of 
policies, plans of insurance, and rates of premium to the Board under 
section 508(h) of the Act and for non-reinsured supplemental policies 
in accordance with the SRA, and the roles and responsibilities of FCIC 
and the applicant. It also specifies the procedures for requesting 
reimbursement for research and development and maintenance costs for 
products and the approval process.


Sec. 400.701  Definitions.

    Act. The Federal Crop Insurance Act, as amended (7 U.S.C. 501 et 
seq.)
    Actuarial documents. The forms and associated materials applicable 
to a crop or insurance year, which are available for public inspection 
in an agent's office and FCIC's website at www.act.fcic.usda.gov. These 
materials show the insurable acreage or commodities, the applicable 
guarantees, coverage levels, premium rates, insurable cropping 
practices common to the area, and other related information regarding 
crop insurance or other risk management plans of insurance in the 
county or state.
    Actuarially appropriate. Premium rates determined to cover the 
anticipated loss and a reasonable reserve based on valid reasoning, an 
examination of all known risk data, and founded on thorough knowledge 
or experience of the expected value of all future costs associated with 
a risk transfer.
    Administrative and operating (A&O) subsidy. An amount for expenses 
associated with selling and servicing insurance products authorized by 
the Act and paid by FCIC on behalf of the producer to approved 
insurance providers.
    Applicant. Any person or entity that submits a policy, provisions 
of a policy, or premium rates to the Board for approval under section 
508(h) of the Act.
    Approved insurance provider. A private insurance company that has 
been approved by FCIC to provide insurance coverage to producers 
participating in programs authorized by the Act.
    Board. The Board of Directors of FCIC.
    Complexity. Complexity takes into consideration such factors as 
originality, the number and type of factual determinations necessary to 
establish insurable interest, evaluate risk, and determine whether an 
indemnity is payable, the number of commodities and areas to which the 
product is applicable, the rating methodology, the number of risks 
covered, and any unique policy provisions or endorsements, the delivery 
process of the submission, and the process of creating rules, policy 
terms and conditions, underwriting procedures, rating methodologies, 
administrative and operating procedures, and supporting materials.
    Development. The process of creating rules, methodologies, 
administrative and operating procedures, supporting materials, and 
documentation necessary to submit, gain approval, and implement a 
proposed policy or coverage.
    Endorsement. A document appended to a policy reinsured under the 
Act that supplements or amends the insurance coverage of that policy.
    FCIC. The Federal Crop Insurance Corporation, a wholly owned 
government corporation within the United States Department of 
Agriculture.
    Maintenance. The process of continual support and improvement, as 
needed, for a policy or plan of insurance, including the periodic 
review of setting prices, updating premium rates or the rating 
methodology, updating or modifying policy terms and conditions, 
expanding into new commodities and areas, and other measures necessary 
to assure financial viability and actuarial soundness or to respond to 
statutory or regulatory changes.
    Maintenance costs. Specific itemized expenses associated with the 
maintenance of a policy during the maintenance period.
    Maintenance period. A period of time that begins on the date the 
Board approves the submission and ends on the date that is not later 
than four reinsurance years after the date of Board approval.
    Manager. The Manager of FCIC.
    Marketability. A measure of the acceptability of a policy as 
reflected by percent of market penetration of the identified target 
market.
    Marketing plan. A detailed, written plan that identifies, at a 
minimum, the expected number of potential buyers, premium, and 
liability and the data upon which such information is based.
    Multiple Peril Crop Insurance (MPCI). All insurance policies 
reinsured by FCIC.
    National Agricultural Statistics Service (NASS). An agency of the 
United States Department of Agriculture, or a successor agency.
    Non-reinsured supplemental policy (NRS). A policy, endorsement or 
other risk management tool that is developed by an approved insurance 
provider, or an entity affiliated in some manner with an approved 
insurance provider, that offers coverage for commodities in addition to 
coverage available under a policy or plan of insurance that is 
reinsured by FCIC. This policy,

[[Page 36954]]

endorsement or other risk management tool has not been submitted under 
508(h) for FCIC approval for reinsurance.
    Non-significant changes. Minor changes to the policy or plan of 
insurance, such as technical corrections, that do not affect the rating 
or pricing methodologies, the amount of subsidy owed, the amount of 
coverage, the interests of producers, FCIC's reinsurance risk, or any 
condition that may affect liability or the amount of loss to be paid 
under the policy. This includes any changes due to statutory or 
regulatory requirements.
    Policy. A contract for insurance that includes an application, 
basic provisions, applicable commodity provisions, other applicable 
options and endorsements, the actuarial documents for the insured 
commodity, and related materials.
    Plan of insurance. A class of policies, such as MPCI or Crop 
Revenue Coverage, that offer a specific type of coverage to one or more 
agricultural commodities.
    Rate of premium. The dollar amount per insured unit or percentage 
rate per dollar of liability that is needed to pay anticipated losses 
and provide a reasonable reserve.
    Related materials. The actuarial documents, special provisions, and 
any underwriting or loss adjustment manuals, handbooks, forms or other 
materials.
    Research. The processes used to determine the need, producer 
interest, marketability, and feasibility of a proposed policy, plan of 
insurance or rate of premium.
    Research and development costs. Specific expenses incurred and 
directly related to research and development of a submission approved 
by the Board.
    Revenue insurance. Plans of insurance providing protection against 
loss of income or change in price.
    Risk Management Agency (RMA). An agency of The United States 
Department of Agriculture, responsible for the administration of all 
programs authorized under the Federal Crop Insurance Act and other 
authorities.
    Risk subsidy. The portion of the approved premium paid by FCIC on 
behalf of the insured person.
    Sales closing date. The final calendar date on which an approved 
insurance provider may accept an application by a producer for 
insurance.
    Secretary. The Secretary of the United States Department of 
Agriculture.
    Significant change. Any change to the policy or plan of insurance 
that may affect the rating and pricing methodologies, the amount of 
subsidy owed, the amount of coverage, the interests of producers, 
FCIC's reinsurance risk, or any condition that may affect liability or 
the amount of loss to be paid under the policy.
    Special Provisions. The part of the policy that contains specific 
provisions of insurance for each insured crop that may vary by 
geographic area.
    Submission. A policy, plan of insurance, provision of a policy or 
plan of insurance, or rates of premium provided by an applicant to FCIC 
in accordance with the requirements of this subpart.
    USDA. The United States Department of Agriculture.
    Use fees. Fees, approved by the Board, that can be charged to 
approved insurance providers for use of a policy or plan of insurance.


Sec. 400.702  Confidentiality of submission and duration of 
confidentiality.

    (a) Prior to approval by the Board, any submission made to the 
Board under section 508(h) of the Act, including any information 
generated from the submission, will be considered confidential 
commercial or financial information for purposes of 5 U.S.C. 552(b)(4) 
and will not be released by FCIC to the public, unless the applicant 
authorizes such release in writing.
    (b) Once the Board approves a submission, all information provided 
with the submission, or generated in the approval process, may be 
released to the public, including any mathematical modeling and data, 
unless it remains confidential business information under 5 U.S.C. 
552(b).
    (c) Any submission disapproved by the Board will remain 
confidential commercial or financial information in accordance with 5 
U.S.C. 552(b) and no information related to such submission will be 
released by FCIC unless authorized in writing by the applicant.


Sec. 400.703  Timing of submission.

    Any submission must be received by the Deputy Administrator, 
Research and Development (or successor), Risk Management Agency, 6501 
Beacon Drive, Stop 0812, Kansas City, MO 64133-4676, not later than 180 
days prior to the earliest proposed sales closing date to be considered 
for sale in the requested crop year.


Sec. 400.704  Type of submission.

    (a) An applicant may submit to the Board in accordance with section 
400.705:
    (1) A policy or plan of insurance not currently reinsured by FCIC;
    (2) One or more proposed revisions to a policy or plan authorized 
under the Act; or
    (3) Rates of premium for any policy or plan authorized under the 
Act.
    (b) An applicant must submit to the Board any significant change to 
a previously approved submission prior to making the change.


Sec. 400.705  Contents of submission for a new submission or changes to 
a previously approved submission.

    A complete submission must contain the following material, as 
applicable, in the order given, and be contained in a 3-ring binder, 
with section dividers clearly labeling each section. The entire 
submission must be included in an electronic format acceptable to RMA. 
Six identical copies of each submission must be sent to the Deputy 
Administrator, Research and Development (or successor), Risk Management 
Agency, 6501 Beacon Drive, Stop 0812, Kansas City, MO 64133-4676, and 
also provide one identical copy of each submission to the 
Administrator, Risk Management Agency, 1400 Independence Ave., Stop 
0801, Room 3053 South Building, Washington, D.C. 20250-0801.
    (a) The first section will contain general information, including, 
as applicable:
    (1) The applicant's name, address or primary business location, 
phone number, and e-mail address;
    (2) The type of submission (see Sec. 400.704);
    (3) A statement of whether the applicant is requesting:
    (i) Reinsurance;
    (ii) Risk subsidy and A&O subsidy; and,
    (iii) Reimbursement for research and development; or
    (iv) Reimbursement for maintenance.
    (4) The proposed agricultural commodities, including types, 
varieties, and practices covered by the submission;
    (5) The crop and reinsurance years in which the submission is 
proposed to be available for purchase by producers;
    (6) The proposed sales closing date;
    (7) The proposed duration and scope of the plan of insurance;
    (8) A marketing plan;
    (9) Any known or anticipated future expansion plans;
    (10) Identification, including names, addresses, telephone numbers, 
and e-mail addresses, of the persons responsible for:
    (i) Addressing questions regarding the policy, underwriting rules 
and procedures, rate and price methodologies, data processing and 
record keeping requirements, and any other questions that may arise in 
administering the program after it is approved; and

[[Page 36955]]

    (ii) Annual reviews to ensure compliance with all requirements of 
the Act, this subpart, and any agreements executed between the 
applicant and FCIC.
    (11) A statement whether the submission will be filed with the 
applicable office responsible for regulating insurance in each state 
proposed for insurance coverage, and, if not, reasons why the 
submission will not be filed for review.
    (b) The second section must contain the benefits of the plan, 
including, as applicable a statement about the plan that demonstrates:
    (1) How the submission offers coverage or other benefits not 
currently available from existing public and private programs.
    (2) The demand for the submission, which must be supported by 
information from market research, producers or producer groups, agents, 
lending institutions, and other interested parties that provide 
verifiable evidence of demand; and
    (3) How the submission meets public policy goals and objectives 
consistent with the Act and other laws, as well as policy goals 
supported by USDA and the Federal Government.
    (c) The third section must contain the policy, including, as 
applicable:
    (1) If the submission involves a new insurance policy or plan of 
insurance:
    (i) All applicable policy provisions; and,
    (ii) A list and description of any additional coverage that may be 
elected by the insured, including how such coverage may be obtained.
    (2) If the submission involves a change to a previously approved 
policy, plan of insurance, or rates of premium, the proposed revisions, 
rationale for each change, data and analysis supporting each change, 
the impact of each change, and the impact of all changes in aggregate.
    (d) The fourth section must contain the information related to the 
marketing of the policy or plan of insurance, including, as applicable:
    (1) A list of states and counties where the submission is proposed 
to be offered;
    (2) The amount of commodity (acres, head, board feet, etc.) and the 
amount of production and the value of each agricultural commodity 
proposed to be covered in each proposed county and state;
    (3) The expected liability and premium for each proposed county and 
state;
    (4) If available, any insurance experience for each year and in 
each proposed county and state in which the policy has been offered for 
sale including an evaluation of the policy's performance and, if data 
are available, a comparison with other similar insurance policies 
reinsured under the Act; and
    (5) The projected insurance experience expected if the proposed 
submission is approved.
    (e) The fifth section must contain the information related to the 
underwriting of the submission, including, as applicable:
    (1) A sample of each document that will be used to present and sell 
the product;
    (2) Detailed rules for determining insurance eligibility, including 
all producer reporting requirements;
    (3) Relevant dates, if not included in the proposed policy;
    (4) Detailed examples of the data and calculations needed to 
establish the insurance guarantee, liability, and premium per acre or 
other unit of measure, including worksheets that provide the 
calculations in sufficient detail and in the same order as presented in 
the policy to allow verification that the premiums charged for the 
coverage are consistent with policy provisions;
    (5) A detailed example of calculations used to determine a claim 
for indemnity for each unique situation in which a loss may be payable;
    (6) A detailed description of the causes of loss covered by the 
policy or plan of insurance and any causes of loss excluded; and
    (7) Any statements to be included in the actuarial documents.
    (f) The sixth section must contain the information related to 
prices and the rates of premium, including, as applicable:
    (1) A list of all assumptions made in the premium rating and 
commodity pricing methodologies, and the basis for these assumptions;
    (2) A detailed description of the pricing and rating methodologies, 
including supporting documentation, all mathematical formulas, 
equations, and data sources used in determining rates and prices and an 
explanation of premium components that detail how rates were determined 
for each component, that demonstrate the rate is appropriate;
    (3) An example of a rate calculation and an example of a price 
calculation;
    (4) A discussion of the reliability of the data; and
    (5) An analysis of the results of simulations or modeling showing 
the performance of proposed rates and commodity prices, as applicable, 
based on one or more of the following (Such simulations must use all 
years of experience available to the applicant):
    (i) A recalculation of total premium and losses compared to a 
similar or comparable insurance plan offered under the authority of the 
Act with modifications, as needed, to represent the components of the 
submission;
    (ii) A simulation based on the probability distributions used to 
develop the rates and commodity prices, as applicable, including 
sensitivity tests that demonstrate price or yield extremes, and the 
impact of inappropriate assumptions; or
    (iii) Any other comparable simulation that provides results 
indicating both aggregate and individual performance of the submission 
under various scenarios depicting good and poor actuarial experience.
    (g) The seventh section must contain an evaluation and 
certification from an accredited associate or fellow of the Casualty 
Actuarial Society, or other similarly qualified professional, that 
certifies the submission is actuarially appropriate and consistent with 
appropriate insurance principles and practices.
    (h) The eighth section must contain all forms applicable to the 
submission, including:
    (1) An application for insurance and procedures for accepting the 
application; and
    (2) All applicable policy forms, instructions and procedures that 
are necessary to establish the amounts of coverage or loss.
    (i) The ninth section must contain the following;
    (1) A statement agreeing that sales will be deferred until the next 
applicable sales closing date if policy information, forms, premium 
rates, prices, any automated premium calculator, and other related 
information or documents are not made available to all approved 
insurance providers:
    (i) For a new submission, at least 60 days prior to the earliest 
sales closing date specified in the submission; or
    (ii) For a revised submission, at least 60 days prior to the 
earliest contract change date specified in the submission;
    (2) An explanation of any provision of the policy not authorized 
under the Act and identification of the portion of the rate of premium 
due to these provisions;
    (3) Agent and loss adjuster training plans; and
    (4) A certification from the applicant's legal counsel that the 
submission meets and complies with all requirements of the Act, 
applicable regulations, and any reinsurance agreement.
    (j) The tenth section must contain the documents that demonstrate 
the

[[Page 36956]]

submission complies in all respects with the standards established for 
processing and acceptance of data as specified in the FCIC Data 
Acceptance System Handbook (Manual 13), unless other arrangements have 
been made with RMA. This handbook is available from the Risk Management 
Agency, 6501 Beacon Drive, Stop 0812, Kansas City, MO 64133-4676 or on 
the FCIC web site (http://www.rma.usda.gov/data/#m13).
    (k) The eleventh section must contain the information related to a 
request for reimbursement of research and development costs, and 
maintenance costs, as applicable, in accordance with Sec. 400.712.


Sec. 400.706  Review of submission.

    (a) Prior to providing any submission, including a new submission, 
a resubmission, or a change to a previously approved submission, to the 
Board for its review, RMA will:
    (1) Review the submission for completeness to determine if all 
necessary and appropriate documentation is included in accordance with 
Sec. 400.705;
    (2) Review the submission to determine whether the documentation is 
of a level of quality to conduct a meaningful review by the Board;
    (3) If the submission is determined to be complete and the 
documentation of sufficient quality to permit a meaningful review, 
acknowledge receipt of the submission. The date on this acknowledgment 
will be considered the date that the submission was received by the 
Board and commence the period in which the submission must be approved 
or disapproved by the Board;
    (4) Return to the applicant a submission lacking any of the 
information required in section 400.705, or with documentation of 
insufficient quality to permit a meaningful review. (Such submission 
will not be considered as received by the Board for the purpose of 
commencing the period by which the submission must be approved or 
disapproved by the Board. If the submission is resubmitted, it will be 
considered a new submission.);
    (b) When FCIC determines that the submission is complete and the 
documentation of sufficient quality to permit a meaningful review, it 
will forward the submission to the Board for consideration of approval 
or disapproval.
    (c) Prior to considering the submission, the Board will:
    (1) For all new submissions or significant changes to previously 
approved submissions, contract with five independent persons with 
underwriting or actuarial experience to review the submission:
    (i) Of the five reviewers, no more than one will be employed by the 
Federal Government, and none may be employed by any approved insurance 
provider or their representatives; and
    (ii) The reviewers will determine if the submission protects the 
interests of agricultural producers and taxpayers, is actuarially 
appropriate, follows appropriate insurance principles, meets the 
requirements of the Act, does not contain excessive risks, follows 
sound, reasonable, and appropriate underwriting principles, as well as 
other items the Board deems necessary;
    (2) For all submissions:
    (i) Request review by FCIC to determine whether the submission 
protects the interests of agricultural producers and taxpayers, is 
actuarially appropriate, follows appropriate insurance principles, 
meets the requirements of the Act, does not contain excessive risks, is 
consistent with USDA's public policy goals, does not increase or shift 
risk to any other FCIC reinsured policy, can be administered and 
delivered efficiently and effectively, and meets the standards pursuant 
to section 400.712 for reimbursement of research and development costs 
and maintenance costs, if requested, and determine whether the 
requested amount of government reinsurance, risk subsidy, and 
administrative and operating subsidies is reasonable and appropriate 
for the type of coverage provided by the policy submission; and
    (ii) Seek review from the Office of the General Counsel (OGC) to 
determine whether the interests of producers are adequately protected 
and if the submission conforms to the requirements of the Act.
    (3) Render a decision to approve or give notice of an intent to 
disapprove within 90 days after the submission is considered received 
by the Board in accordance with paragraph (a)(3) of this section, 
unless the applicant and Board negotiate a time delay in accordance 
with paragraph (h) of this section.
    (d) All comments and evaluations will be forwarded to the Board by 
a date determined to allow the Board adequate time for review and 
consideration of approval or disapproval.
    (e) The Board will consider all comments, evaluations, and 
recommendations in its review process. Prior to making a decision, the 
Board may request additional information from RMA, OGC, the independent 
reviewers, or the applicant.
    (f) The Board may disapprove a submission if it determines that:
    (1) The interests of producers are not protected;
    (2) The premium rates are not actuarially appropriate;
    (3) The submission does not conform to sound insurance and 
underwriting principles;
    (4) The risks associated with the submission are excessive; or
    (5) There is insufficient time before the submission would become 
effective under section 508(h) of the Act for the Board to make an 
informed decision with respect to whether the interests of producers 
are protected, the premium rates are actuarially appropriate, or the 
risks associated with the submission are excessive.
    (g) If the Board intends to disapprove the submission, the 
applicant will be notified in writing at least 30 days prior to the 
Board taking such action. The Board will provide the applicant with a 
written explanation for the intent to disapprove the submission.
    (h) An applicant may negotiate, at any time, a time delay before 
the Board provides a notice of intent to disapprove the submission. The 
Board is not required to agree to such an extension.
    (1) The applicant will not be limited in the length of the delay or 
the number of delays negotiated. However, delays may make 
implementation of the submission for the targeted crop year impractical 
or impossible.
    (2) The time period during which the Board must make a decision to 
approve or disapprove the submission is not in effect during any 
negotiated time delay.
    (3) After the expiration of the negotiated time delay, the time 
period in which the Board must make its decision to approve or 
disapprove will commence again (For example, on day 85, the applicant 
and the Board negotiate a time delay of 90 days. At the end of the 90 
day period, the Board will have 5 days to act on the submission or 
negotiate an additional time delay).
    (i) The applicant may withdraw a submission at any time by written 
request to the Board. A withdrawn submission that is resubmitted will 
result in the submission being deemed a new submission for the purposes 
of determining the amount of time that the Board must act on such 
submission.
    (j) Following notification of the Board's intention to disapprove a 
submission, the applicant may modify the submission:
    (1) The applicant must notify the Board in writing prior to Board 
action if the submission will be modified. Once written notice is 
received from the applicant, Board action for disapproval will be 
suspended.

[[Page 36957]]

    (2) The applicant has an unlimited number of days in which to 
submit a modified submission.
    (3) The Board will approve or disapprove a modified submission not 
later than 30 days after receiving a modified submission from the 
applicant, unless the applicant and the Board negotiate a time delay. 
If a time delay is negotiated, the time period during which the Board 
must act on the modified submission will not be in effect during any 
negotiated time delay.
    (4) The Board will disapprove a modified submission if:
    (i) All causes for disapproval stated by the Board in its 
notification of its intent to disapprove the submission are not 
satisfactorily addressed;
    (ii) Insufficient time is available for review of the modified 
submission to determine whether all causes for disapproval have been 
satisfactorily addressed; or
    (iii) If modification is substantial so the Board determines that 
independent review is required and a time delay cannot be negotiated to 
allow for independent review.
    (k) When the applicant is notified of the Board's intent to 
disapprove and the submission is not revised or withdrawn, the Board 
will provide written notification to the applicant that the submission 
has been disapproved no less than 30 days after the date that the 
notice of intent to disapprove was provided to the applicant.
    (l) If the Board fails to take action on a new submission within 
the prescribed 90 day period in paragraph (b)(3) of this section, or 
within 30 days after receiving the revised submission, such submission 
will be deemed approved by the Board for the initial reinsurance year 
designated for the submission. The Board must approve the submission 
for it to be available for subsequent reinsurance years.


Sec. 400.707  Presentation to the Board for approval or disapproval.

    (a) The Board will inform the applicant of the date, time, and 
place of the Board meeting.
    (b) The applicant will be given the opportunity and is encouraged 
to present the submission to the Board in person. The applicant must 
confirm, in writing, whether the applicant will present the submission 
to the Board.
    (c) If the applicant elects, at any time, not to present the 
submission to the Board, the Board will make its decision based on the 
submission and the reviews provided in accordance with section 
400.706(c).


Sec. 400.708  Approved submission.

    (a) After a submission is approved by the Board, and prior to it 
being made available for sale to producers, the following items, as 
applicable, must be completed:
    (1) An agreement between the applicant and FCIC that specifies the 
responsibilities of each with respect to the implementation, delivery 
and oversight of the submission, including the disposition of property 
rights for the policy; and
    (2) A reinsurance agreement if terms and conditions differ from the 
Standard Reinsurance Agreement.
    (b) A submission approved by the Board under this subpart will be 
made available to all approved insurance providers under the same 
reinsurance and subsidy terms and conditions as received by the 
applicant.
    (c) Any solicitation, sales, marketing, or advertising of the 
approved submission by the applicant 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 affected.


Sec. 400.709  Roles and responsibilities.

    (a) With respect to the applicant:
    (1) The applicant is responsible for:
    (i) Preparing and ensuring that all policy documents, rates of 
premium, and supporting materials, including actuarial materials, are 
submitted to FCIC in the form approved by the Board;
    (ii) Annually updating and providing maintenance changes no later 
than 180 days prior to the earliest sales closing date for the 
commodity in all counties or states in which the policy or plan of 
insurance is sold; and
    (iii) Addressing responses to procedural issues, questions, 
problems or clarifications in regard to a policy or plan of insurance. 
(All such resolutions will be communicated to all approved insurance 
providers through FCIC's official issuance system.);
    (2) Only the applicant may make changes to the policy, plan of 
insurance, or rates of premium approved by the Board. (Any changes, 
both non-significant and significant, must be submitted to FCIC no 
later than 180 days prior to the earliest sales closing date for the 
commodity in all counties or states in which the policy or plan of 
insurance is sold. Significant changes must be submitted to the Board 
for review in accordance with this subpart and will be considered as a 
new submission.);
    (3) Except as provided in paragraph (a)(4) of this section, the 
applicant is solely liable for any mistakes, errors, or flaws in the 
submitted policy, plan of insurance, their related materials, or the 
rates of premium that have been approved by the Board;
    (4) If the mistake, error, or flaw in the policy, plan of 
insurance, their related materials, or the rates of premium is 
discovered not less than 45 days prior to the cancellation or 
termination date for the policy or plan of insurance, the applicant can 
request in writing that FCIC withdraw the approved policy, plan of 
insurance, or rates of premium:
    (i) Such request must state the discovered mistake, error, or flaw 
in the policy, plan of insurance, or rates of premium, and the expected 
impact on the program; and
    (ii) For all timely received requests for withdrawal, no liability 
will attach to such policies, plans of insurance, or rates of premium 
that have been withdrawn and no producer, approved insurance provider, 
or any other person will have a right of action against the applicant; 
and
    (5) Notwithstanding the policy provisions regarding cancellation, 
policies, plans of insurance, or rates of premium that have been timely 
withdrawn are deemed canceled and applications for insurance not 
accepted as of the date that FCIC publishes the notice of withdrawal on 
its website at www.act.fcic.usda.gov. Producers will have the option of 
selecting any other policy or plan of insurance authorized under the 
Act by the sales closing date for such policy or plan of insurance.
    (6) Failure of the applicant to perform the applicant's 
responsibilities may result in the denial of reinsurance for the policy 
or plan of insurance.
    (b) With respect to FCIC:
    (1) FCIC is responsible for:
    (i) Ensuring that all approved insurance providers receive the 
approved policy or plan of insurance, and related materials, for sale 
to producers in a timely manner (All such information shall be 
communicated to all approved insurance providers through FCIC's 
official issuance system.);
    (ii) Ensuring that all approved insurance providers receive 
reinsurance under the same terms and conditions as the applicant 
(Approved Insurance Providers should contact FCIC to obtain and execute 
a copy of the reinsurance agreement);
    (iii) Conducting the best review of the submission possible in the 
brief time allowed; and
    (iv) Reviewing the activities of approved insurance providers, 
agents, loss adjusters, and producers to ensure that they are in 
accordance with the

[[Page 36958]]

terms of the policy or plan of insurance, the reinsurance agreement, 
and all applicable procedures;
    (2) FCIC will not be liable for any mistakes, errors, or flaws in 
the policy, plan of insurance, their related materials, or the rates of 
premium and no cause of action will exist against FCIC as a result of 
such mistake, error, or flaw in a submission submitted under this 
subpart under any circumstance;
    (3) If at any time prior to the cancellation or termination date, 
FCIC discovers that there is a mistake, error, or flaw in the policy, 
plan of insurance, their related materials, or the rates of premium 
that results in over or under insurance, FCIC will deny reinsurance to 
such policy or plan of insurance; and
    (4) If reinsurance is denied under paragraph (b)(4) of this 
section, the approved insurance provider will have the option of:
    (i) Selling and servicing the policy or plan of insurance at its 
own risk; or
    (ii) Canceling the policy or plan of insurance in accordance with 
its terms.


Sec. 400.710  Preemption and premium taxation.

    A policy or plan of insurance that is approved by the Board for 
FCIC reinsurance, A&O subsidy, and risk subsidy is preempted from state 
and local taxation.


Sec. 400.711  Right of review, modification, and the withdrawal of 
reinsurance.

    At any time after approval, the Board may review any policy, plan 
of insurance, related materials, and rates of premium approved under 
this subpart and request additional information to determine whether 
the policy, plan of insurance, related materials, and rates of premium 
comply with statutory or regulatory changes or court orders, are still 
actuarially appropriate, and protect program integrity and the 
interests of producers. The Board will notify the submitter of any 
problems or issues that arise and allow the submitter an opportunity to 
make any needed changes. The Board may deny reinsurance for the 
applicable policy, plan of insurance or rate of premium if;
    (a) The applicant fails to perform their responsibilities under 
section 400.709; or
    (b) If the applicant does not satisfactorily provide materials or 
resolve any issue so that necessary changes can be made prior to the 
earliest contract change date.


Sec. 400.712  Research and development reimbursement, maintenance 
reimbursement, and use fees.

    (a) Submissions approved by the Board for reinsurance under section 
508(h) of the Act may be eligible for a one time payment of research 
and development costs and payment of maintenance costs for up to four 
reinsurance years, as determined by the Board, after the date such 
costs have been approved by the Board. Reimbursements made under this 
section will be considered as payment in full for research, 
development, and maintenance, as applicable, for any policy or plan of 
insurance and any property rights to the policy or plan of insurance.
    (b) For submissions approved by the Board for reinsurance under 
this subpart a request for reimbursement of research and development 
costs, and maintenance costs, as applicable, must, in accordance with 
this section, be included with the original submission to the Board.
    (c) For a submission approved by the Board prior to publication of 
this subpart, a request for reimbursement for research and development 
costs must be received within 60 days following publication of this 
subpart. This request should be sent to the Deputy Administrator, 
Research and Development (or successor), Risk Management Agency, 6501 
Beacon Drive, Stop 0812, Kansas City, MO 64133-4676, and also provide 
one identical copy of each submission to the Administrator, Risk 
Management Agency, 1400 Independence Ave., Stop 0801, Room 3053 South 
Building, Washington, D.C. 20250-0801.
    (d) To be eligible for any reimbursement under this section, FCIC 
must determine that a submission is marketable, based on a reasonable 
marketing plan.
    (e) To be considered for reimbursement in any fiscal year, requests 
for research and development costs and maintenance costs, as 
applicable, must be received by FCIC not later than August 1. Given the 
limitation on funds, regardless of when the request is received, no 
payment will be made prior to September 15 of the applicable fiscal 
year.
    (f) There are limited funds available on an annual fiscal year 
basis as contained in the Act. Therefore, requests for reimbursement 
will not be considered in the order in which they are received. 
Consistent with paragraphs (g), (h), (i), (j), and (l) of this section, 
if all applicants' requests for reimbursement of research and 
development costs and maintenance costs in any fiscal year:
    (1) Do not exceed the maximum amount authorized by law, the 
applicants may receive the full amount of reimbursement authorized 
under these subsections.
    (2) Exceed the amount authorized by law, each applicant's 
reimbursement will be determined by dividing the total amount of each 
individual applicants' reimbursable costs authorized in paragraphs (g), 
(h), (i), (j), and (l) by the total amount of the aggregate of all 
applicants' reimbursable costs authorized in paragraphs (g), (h), (i), 
(j), and (l) for that year and multiplying the result by the amount of 
reimbursement authorized under the Act.
    (g) The amount of reimbursement for research and development costs 
and maintenance costs, as applicable, will be determined based on the 
amount of reimbursement authorized under paragraph (f) of this section, 
adjusted for the complexity of the policy, plan of insurance, or rates 
of premium, as determined by FCIC, and the size of the area in which 
the policy, plan of insurance, or rates of premium may be offered.
    (1) Policies or plans of insurance that offer new and innovative 
coverages that are not currently available will be eligible for a 
higher reimbursement than policies or plans of insurance that are, or 
have components that are based on existing policies or plans of 
insurance.
    (2) Policies or plans of insurance that offer new premium rating or 
market price methodologies will be eligible for a higher reimbursement 
than policies or plans of insurance that use existing premium rating or 
market price methodologies.
    (3) Policies or plans of insurance that cover new commodities that 
are not otherwise covered by crop insurance or that offer innovative 
coverage and original policy language will be eligible for a higher 
reimbursement than policies or plans of insurance for commodities for 
which insurance is currently available.
    (4) Policies or plans of insurance that may be offered for sale 
nationwide or in large geographical regions will be eligible for higher 
reimbursement than those that are applicable to only a few counties or 
states or a small geographical region.
    (5) Any reimbursement under this subpart will be scored as follows:
    (i) Complexity scores:
    (A) Basic or Common Provisions:
    (1) Uses existing policies or plans of insurance: 0.05
    (2) Contains modifications to existing policies or plans of 
insurance: 0.10
    (3) Original (See paragraph (g)(3) of this section): 0.20
    (B) Crop Provisions and Special Provisions:

[[Page 36959]]

    (1) Uses existing policies or plans of insurance: 0.05
    (2) Contains modifications to existing policies or plans of 
insurance: 0.10
    (3) Original (See paragraph (g)(3) of this section): 0.20
    (C) Market prices
    (1) Uses existing policies or plans of insurance: 0.05
    (2) Contains modifications to existing policies or plans of 
insurance: 0.10
    (3) Original (See paragraph (g)(3) of this section): 0.20
    (D) Rates of Premium
    (1) Uses existing policies or plans of insurance: 0.05
    (2) Contains modifications to existing policies or plans of 
insurance: 0.10
    (3) Original (See paragraph (g)(3) of this section): 0.20
    (E) Underwriting
    (1) Uses existing policies or plans of insurance: 0.05
    (2) Contains modifications to existing policies or plans of 
insurance: 0.10
    (3) Original (See paragraph (g)(3) of this section): 0.20
    (ii) Geographic scope scores
    (A) Potential national availability: 0.10
    (B) Potential regional, state or county availability: 0.05
    (6) In accordance with paragraph (e) of this section, those 
policies or plans of insurance that receive a summed total score for 
both complexity and geographic scope that is:
    (i) Equal to or greater than 0.6 may receive the full amount of 
reimbursement approved by the Board under paragraphs (h), (i) or (j) of 
this section;
    (ii) Greater than 0.25 but lower than 0.60 will receive a 
reimbursement that is not greater than 75 percent of the full amount of 
reimbursement approved by the Board under paragraphs (h), (i) or (j) of 
this section; and
    (iii) Equal to or less than 0.25 will receive a reimbursement that 
is not greater than 50 percent of the full amount of reimbursement 
approved by the Board under paragraphs (h), (i) or (j) of this section.
    (h) For those submissions that were approved by the Board prior to 
the date of publication of this subpart, reimbursement for research and 
development costs will be determined in accordance with paragraph (i) 
of this section or by multiplying the average number of policies 
earning premium each crop year since inception of the policy or plan of 
insurance by $7.00 and multiplying the result by the complexity and 
scope score from paragraph (g) of this section.
    (i) For those submissions submitted to the Board prior to the date 
of publication of this subpart but not yet approved, or submitted to 
the Board for approval after the date of publication of this part, 
research and development costs must be supported by itemized statements 
and supporting documentation. Costs will be examined for reasonableness 
and may be adjusted at the sole discretion of the Board.
    (1) Allowable research and development expense items may include 
the following;
    (i) Straight-time hourly wage, exclusive of bonuses, overtime pay, 
or shift differentials (One line per employee, include job title, total 
hours, and total dollars.) Compensation amounts will be compared with 
the Occupational Employment Statistics Survey, published each January 
by the U.S. Department of Labor, Bureau of Labor Statistics;
    (ii) Benefit cost per employee (Benefit costs are considered 
overhead and will be compared with the Employment Cost Index Annual 
Employer Cost Survey published each March by the U.S. Department of 
Labor, Bureau of Labor Statistics.);
    (iii) Contracted expenses (include a copy of the contract);
    (iv) Professional fees (include the job title, straight-time hourly 
wage, total hours, and total dollars);
    (v) Travel and transportation (One line per event, include the job 
title, destination, purpose of travel, lodging cost, mileage, air or 
other identified transportation costs, food and miscellaneous expenses, 
other costs, and the total cost);
    (vi) Software and computer programming developed specifically to 
determine appropriate rates, prices, or coverage amounts (Identify the 
item, include the purpose, and provide receipts or contract or 
straight-time hourly wage, hours, and total cost.) (Software developed 
to calculate premiums or losses, or development of software to send or 
receive data between the producer, agent, Approved Insurance Provider 
or RMA may not be included as an allowable cost.);
    (vii) Miscellaneous expenses such as postage, telephone, express 
mail, and printing (Identify the item, cost per unit, number of items, 
and total dollars);
    (2) The following expenses are specifically not eligible for 
research and development cost reimbursement:
    (i) Copyright or patent fees;
    (ii) Training costs;
    (iii) State filing fees and expenses;
    (iv) Normal ongoing administrative expenses;
    (v) Paid or incurred losses;
    (vi) Loss adjustment expenses;
    (vii) Sales commission;
    (viii) Marketing costs;
    (ix) Indirect overhead costs;
    (x) Lobbying costs;
    (xi) Product or applicant liability resulting from the research, 
development, preparation or marketing of the policy;
    (xii) Copyright infringement claims resulting from the research, 
development, preparation or marketing of the policy;
    (xiii) Costs of making program changes as a result of case or 
statutory law effecting the policy; and
    (xiv) Maintenance costs associated with the submission.
    (j) Requests for reimbursement of maintenance costs must be 
supported by itemized statements and supporting documentary evidence. 
Costs will be examined for reasonableness and may be adjusted at the 
sole discretion of the Board.
    (1) Maintenance costs for the following activities may be 
reimbursed:
    (i) Expansion of the original submission to cover additional 
commodities;
    (ii) Expansion of the original submission into additional counties 
or states;
    (iii) Reasonable and required modifications to the policy and any 
related materials;
    (iv) Adjustment to premium rates and commodity prices as necessary 
or required; and
    (v) Other costs associated with maintaining the policy, as 
determined by the Board.
    (2) [Reserved]
    (k) Not later than six months prior to the end of the last 
reinsurance year in which a maintenance reimbursement will be paid, as 
approved by the Board, the applicant must notify FCIC regarding its 
election regarding the treatment of the policy or plan of insurance for 
subsequent reinsurance years.
    (1) The applicant must notify FCIC whether it intends to:
    (i) Continue to maintain the policy or plan of insurance and charge 
a use fee, as approved by the Board, to approved insurance providers to 
cover maintenance expenses; or
    (ii) Transfer responsibility for maintenance to FCIC.
    (2) If the applicant elects to:
    (i) Transfer the policy or plan of insurance to FCIC, FCIC may, at 
its sole discretion, elect to withdraw the availability of the policy 
or plan of insurance or continue to maintain the policy or plan of 
insurance; or
    (ii) Continue to maintain the policy or plan of insurance, at the 
time of the election, the applicant must submit a

[[Page 36960]]

request for approval of the use fee by the Board.
    (3) Requests for approval of the use fee must be accompanied by 
written documentation to support the amount requested.
    (4) The Board will approve the amount of use fee that is payable to 
the applicant by approved insurance providers unless the Board 
determines that the use fee charged:
    (i) Is unreasonable in relation to the maintenance costs associated 
with the policy or plan of insurance; or
    (ii) Unnecessarily inhibits the use of the policy or plan of 
insurance by other Approved Insurance Providers.
    (5) Reasonableness of the use fees will be determined by the Board 
based on a comparison with the amount of reimbursement for maintenance 
previously received, the number of policies, the number of Approved 
Insurance Providers, and the expected total amount of use fees to be 
received in any reinsurance year.
    (6) A use fee unnecessarily inhibits the use of a policy or plan of 
insurance if it is so high that other Approved Insurance Providers are 
unable to pay such fees because of the volume of business currently 
underwritten by the approved insurance provider.
    (7) The use fee charged to each Approved Insurance Provider will be 
considered payment in full for the use of such policy, plan of 
insurance or rate of premium for the reinsurance year in which payment 
is made.
    (l) The Board may consider information from the Equal Access to 
Justice Act, 5 U.S.C. 504, the Bureau of Labor Statistic's Occupational 
Employment Statistics Survey, the Bureau of Labor Statistic's 
Employment Cost Index, and any other information determined applicable 
by the Board, in making a determination whether to approve a submission 
for reimbursement of research, development, or maintenance costs under 
this section or the amount of reimbursement.
    (m) Any false statements made to FCIC may subject the applicant to 
administrative, criminal, or civil penalties as authorized by law.
    (n) For purposes of this section, rights to, or obligations of, 
research and development reimbursement, maintenance reimbursement, or 
use fees cannot be transferred from any individual or entity unless 
specifically approved in writing by the Board.


Sec. 400.713  Non-Reinsured Supplemental (NRS) Policy.

    (a) The reinsured company must submit three copies of the new or 
revised NRS policy and related materials to the Deputy Administrator, 
Research and Development (or successor), Risk Management Agency, 6501 
Beacon Drive, Stop 0812, Kansas City, MO 64133-4676 for review, 
approval or disapproval at least 90 days prior to the first sales 
closing date applicable to the policy reinsured by FCIC.
    (b) FCIC will approve the NRS policy if it does not increase or 
shift risk to the underlying policy or plan of insurance reinsured by 
FCIC, affect any rights of the insured with respect to the underlying 
reinsured policy or plan of insurance, or cause disruption in the 
marketplace for products reinsured by FCIC. Marketplace disruption 
includes adversely affecting sales or administration of the underlying 
reinsured policy, undermining producers' confidence in the Federal crop 
insurance program, decreasing the producer's willingness or ability to 
use Federally reinsured risk management products, or harming public 
perception of the Federal crop insurance program.
    (c) Failure to timely submit the NRS policy to FCIC will result in 
the denial of reinsurance and subsidy for all policies reinsured by 
FCIC for which the insured has obtained the NRS policy.

    Signed in Washington, D.C. on July 10, 2001.
Phyllis W. Honor,
Acting Manager, Federal Crop Insurance Corporation.
[FR Doc. 01-17607 Filed 7-11-01; 3:48 pm]
BILLING CODE 3410-08-P