[Federal Register Volume 66, Number 180 (Monday, September 17, 2001)]
[Rules and Regulations]
[Pages 47949-47959]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-23157]



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 Rules and Regulations
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  Federal Register / Vol. 66, No. 180 / Monday, September 17, 2001 / 
Rules and Regulations  

[[Page 47949]]



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: Interim rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) amends 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), 
in accordance with section 2108 of the 2001 Supplemental Appropriations 
Act.
    This rule prescribes the respective roles and responsibilities of 
FCIC and the applicant. 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. 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).

EFFECTIVE DATES: This rule is effective September 17, 2001. Written 
comments and opinions on this interim rule will be accepted until close 
of business November 16, 2001 and will be considered when the rule is 
to be made final. Comments to the General Administrative Regulations; 
Submission of Policies, Provisions of Policies, and Rates of Premium 
proposed rule published in the Federal Register on July 16, 2001, will 
be considered at the same time that comments are considered for this 
rule and those comments will not have to be resubmitted for 
consideration. The comment period for information collections under the 
Paperwork Reduction Act of 1995 continues through November 16, 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 7:00 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 this 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, DC 20503. A comment to OMB is 
best assured of having its full effect if OMB receives it within 30 
days of publication of this 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 that section 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 applicant 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 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).

[[Page 47950]]

    Purpose: To amend 7 CFR part 400 by revising subpart V.
    Burden statement: This 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 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 the submission prior to Board 
approval--15,000 hours (15 applicants  x  1,000 hours = 15,000); (3) 
Preparation of correspondence between the 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 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 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

    On July 16, 2001, FCIC published this rule as a proposed rule (66 
FR 36951-36960). During the comment period, Congress enacted section 
2103 of the 2001 Supplemental Appropriations Act, which authorized FCIC 
to promulgate this rule without regard to the notice and comment 
provisions of section 533 of title 5, United States Code, the Statement 
of Policy of the Secretary of Agriculture effective July 24, 1971, 
relating to notices of proposed rulemaking and public participation in 
rulemaking, and chapter 35 of title 44, United States Code. Congress 
also required that this rule be effective on the date of publication.
    FCIC makes available standard policies for producers to insure 
certain

[[Page 47951]]

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.
    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 user fees for such submissions. This rule also clarifies 
the roles and responsibilities of FCIC and the applicant 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.
    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 and maintenance 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.
    Other technical corrections have been made as a result additional 
review and discussion with the Board.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedures, Crop insurance.

Interim Rule

    Accordingly, for the reasons set forth in the preamble, the Federal 
Crop Insurance Corporation amends 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 required 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 user 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 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. 1501 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, 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 USDA.
    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.

[[Page 47952]]

    Maintenance costs. Specific 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 for maintenance and ends on the date that 
is not more than four reinsurance years after such approval.
    Manager. The Manager of FCIC.
    Marketable. An evaluation by the Board of the marketing plan 
submitted by the applicant that determines that producers will purchase 
the product and approved insurance providers will sell the product 
based on credible evidence provided by the applicant.
    Marketing plan. A detailed, written plan that identifies, at a 
minimum, the expected number of potential buyers, premium, and 
liability, the data upon which such information is based and a 
prescribed insurance year cycle.
    Multiple peril crop insurance (MPCI). All insurance policies 
reinsured by FCIC that offers coverage for loss of production.
    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, other than for loss related 
to hail, for commodities in addition to coverage available under a 
policy or plan of insurance that is reinsured by FCIC. This policy, 
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, if the product is marketable, 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 USDA responsible for the 
administration of all programs authorized under the 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.
    User 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.

    (a) A submission may only be provided to FCIC the first 5 business 
days of the months of, January, April, July, and October.
    (b) Any submission not provided within the first 5 business days of 
a month stated in paragraph (a) of this section, will be considered to 
have been provided the next month stated in paragraph (a). For example, 
if an applicant provides a submission on the January 10, it will be 
considered to have been received on April 1.
    (c) Any submission must be provided to the Deputy Administrator, 
Research and Development (or any 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 
Sec. 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 of insurance 
authorized under the Act; or
    (3) Rates of premium for any policy or plan of insurance 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 required 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, in a 3-ring binder, with

[[Page 47953]]

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 
one identical copy of each submission provided to the Administrator, 
Risk Management Agency, 1400 Independence Ave., Stop 0801, Room 3053 
South Building, Washington, DC 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, which includes risk subsidy and A&O subsidy;
    (ii) Costs for reimbursement for research and development; or
    (iii) Estimated costs for 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
    (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.), 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 previously 
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 frequency and severity of loss 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 or form 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

[[Page 47954]]

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 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.
    (l) The twelfth section must contain executed certification 
statements in accordance with the following:
    (1) ``{Applicant's Name} hereby claim that the amounts set forth in 
this section and Sec. 400.712 are correct and due and owing to 
{Applicant's Name} by FCIC under the Federal Crop Insurance Act.''
    (2) ``{Applicant Name} understands that, in addition to criminal 
fines and imprisonment, the submission of false or fraudulent 
statements or claims may result in civil and administrative 
sanctions.''


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, the 
submission will be considered to have been submitted to the Board for 
approval or disapproval. The date that FCIC determines that the 
submission is complete, as notified to the applicant, will be the date 
that the time frame for approval or disapproval by the Board begins;
    (4) Return to the applicant any submission lacking any of the 
information required in Sec. 400.705, or with documentation that is of 
insufficient quality to permit a meaningful review (such submission 
will not be considered as provided to 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 for approval 
or disapproval.
    (c) During the consideration process, 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 each provide their assessment of 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, follows sound, reasonable, and appropriate 
underwriting principles, as well as other items the Board may deem 
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 Sec. 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 date the submission is considered 
submitted to the Board in accordance with paragraph (a)(3) of this 
section, unless the applicant and Board agree to 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.
    (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

[[Page 47955]]

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 request, 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 understands that any requested time delay will 
not be limited in the length time or the number of delays. 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 time 
delay requested by the applicant.
    (3) The Board and the applicant must agree to a time period in 
which the Board must make its decision to approve or disapprove after 
the expiration of any requested 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) Prior to any Board action taken or after the Board has provided 
formal notice of its intent to disapprove all or part of a submission:
    (1) Modification can occur in writing or orally prior to the Board 
providing notice of its intent to disapprove all or part of a 
submission.
    (2) After formal notice of intent to disapprove all or part of a 
submission has been provided by the Board, the applicant must provide 
written to the Board that the submission will be modified not later 
than 30 days after the Board provided such notice. Except as provided 
in paragraph (j)(5) of this section, the applicant must also include 
the date that the modification will be provided to the Board.
    (3) If the modification is in direct response to reviewer comments, 
the Board may act on the modification immediately or seek further 
review within the 30 day time period allowed.
    (4) 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 agree to a time delay. If 
a time delay is agreed upon the time period during which the Board must 
act on the modified submission will not be in effect during the delay.
    (5) 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 so substantial that the Board determines 
that additional independent review is required and a time delay can not 
be agreed to allow for such 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 (c)(3) of this section, or 
within the time period in accordance with paragraph (h)(3) of this 
section 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 any subsequent reinsurance year.


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 Sec. 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) If the Board requires, 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) Except as provided in Sec. 400.712(k)(2), 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,

[[Page 47956]]

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 unless the policy 
or plan of insurance is transferred to FCIC in accordance with 
Sec. 400.712(k)(2), the applicant remains liable for any mistakes, 
errors, or flaws that occurred prior to the transfer of the policy or 
plan of insurance;
    (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 may 
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, 
any policy, plan of insurance, or rates of premium that have been 
timely withdrawn are deemed canceled and applications for insurance are 
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 that is available in their area 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) if required;
    (iii) Conducting the best review of the submission possible in the 
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 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;
    (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:
    (4) If reinsurance is denied under paragraph (b)(3) 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 and without any subsidy; or
    (ii) Canceling the policy or plan of insurance in accordance with 
its terms; and
    (5) If the applicant transfers the policy or plan of insurance to 
FCIC in accordance with Sec. 400.712 (k)(2), FCIC will assume the 
liability for any mistakes, errors, or flaws that occur after the 
policy or plan insurance as been transferred and FCIC is in control of 
maintenance.


Sec. 400.710  Preemption and premium taxation.

    A policy or plan of insurance that is approved by the Board for 
FCIC reinsurance 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 applicant of any 
problem or issue that may arise and allow the applicant an opportunity 
to make any needed change. 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 
Sec. 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 user 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 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 submitted to the Board for reinsurance after 
publication of this subpart, an estimate of a request for reimbursement 
of research and development costs and maintenance costs, as applicable, 
must be included with the original submission to the Board in 
accordance with this section. These estimates will only be used by FCIC 
for the purpose of tracking potential expenditures and will not 
provided a basis for making any reimbursements under this section. 
Documentation of actual costs allowed under this section will be used 
to determine any reimbursement.
    (c) For a submission approved by the Board, or submitted to the 
Board, prior to publication of this subpart, a request for 
reimbursement for research and development costs and estimated 
maintenance costs must be received within 60 days following publication 
of

[[Page 47957]]

this subpart or approval of the submission by the Board. This request 
should be sent to the Deputy Administrator, Research and Development 
(or any 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.
    (e) To be considered for reimbursement in any fiscal year, complete 
and final requests for research and development costs and maintenance 
costs, as applicable, must be received by FCIC not later than August 1. 
For 2001 fiscal year only, FCIC may consider reimbursement for research 
and development costs on approved submissions for any request received 
by September 1, 2001. 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:
    (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 (copies of contracts, billing statements, 
time sheets, travel vouchers, accounting ledgers, etc.). Actual costs 
submitted will be examined for reasonableness and may be adjusted at 
the sole discretion of the Board.
    (1) Allowable research and development expense items (directly 
related to research and development of the submission only) 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

[[Page 47958]]

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, billing 
statements, accounting records, etc.);
    (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 or such other similar software 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 for submissions 
approved after publication of this subpart must be supported by 
itemized statements and supporting documentary evidence for each 
reinsurance year in the maintenance period. For submissions approved 
prior to publication of this subpart, the applicant may provide 
itemized statements and supporting documentary evidence or may request 
to receive not more than 15 percent of the amount of reimbursement for 
research and development costs, as determined in accordance with 
Sec. 400.712, for the first reinsurance year in the maintenance period. 
For all subsequent reinsurance years, itemized and supporting 
documentary evidence must be provided. Actual costs submitted 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 of 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 user fee, as approved by the Board, to approved insurance providers 
for all policies earning premium to cover maintenance expenses. It is 
the sole responsibility of the applicant to collect such fees from the 
approved insurance providers and any indebtedness for such fees must be 
resolved by the applicant and approved insurance provider. Applicants 
may request that FCIC provide the number of policies sold by each 
approved insurance provider. Such information will be provided not 
later than 90 days after such request is made or not later than 90 days 
after the requisite information has been provided to FCIC by the 
approved insurance provider, which ever is later; 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 request for approval 
of the user fee by the Board.
    (3) Requests for approval of the user fee must be accompanied by 
written documentation to support that the amount requested will only 
cover maintenance costs.
    (4) The Board will approve the amount of user fee that is payable 
to the applicant by approved insurance providers unless the Board 
determines that the user 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 user 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 user fees to be 
received in any reinsurance year.
    (6) A user 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 user 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.

[[Page 47959]]

    (m) For purposes of this section, rights to, or obligations of, 
research and development reimbursement, maintenance cost reimbursement, 
or user 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 September 12, 2001.
Phyllis W. Honor,
Acting Manager, Federal Crop Insurance Corporation.
[FR Doc. 01-23157 Filed 9-12-01; 4:21 pm]
BILLING CODE 3410-08-P