[Federal Register Volume 83, Number 27 (Thursday, February 8, 2018)]
[Proposed Rules]
[Pages 5573-5576]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02489]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 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. 83, No. 27 / Thursday, February 8, 2018 / 
Proposed Rules  

[[Page 5573]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

[Docket No. FCIC-17-0005]
RIN 0563-AC54


General Administrative Regulations; Subpart L--Reinsurance 
Agreement--Standards for Approval; Regulations for the 2019 and 
Subsequent Reinsurance Years

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) proposes to 
revise the General Administrative Regulations; Subpart L--Reinsurance 
Agreement--Standards for Approval; Regulations for the 2019 and 
Subsequent Reinsurance Years. The intended effect of this action is to 
clarify and improve Subpart L to better align with the existing 
Standard Reinsurance Agreement (SRA) and Livestock Price Reinsurance 
Agreement (LPRA) and to eliminate language that is no longer relevant.

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business April 9, 2018 and will be considered 
when the rule is made final.

ADDRESSES: FCIC prefers that comments be submitted electronically 
through the Federal eRulemaking Portal. You may submit comments, 
identified by Docket ID No. FCIC-17-0005, by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     By Mail to: Director, Reinsurance Services Division, 
Federal Crop Insurance Corporation, United States Department of 
Agriculture (USDA), 1400 Independence Avenue SW, Stop 0801, Washington, 
DC 20250.
    All comments received, including those received by mail, will be 
posted without change to http://www.regulations.gov, including any 
personal information provided, and can be accessed by the public. All 
comments must include the agency name and docket number or Regulatory 
Information Number (RIN) for this rule. For detailed instructions on 
submitting comments and additional information, see http://www.regulations.gov. If you are submitting comments electronically 
through the Federal eRulemaking Portal and want to attach a document, 
we ask that it be in a text-based format. If you want to attach a 
document that is a scanned Adobe PDF file, it must be scanned as text 
and not as an image, thus allowing FCIC to search and copy certain 
portions of your submissions. For questions regarding attaching a 
document that is a scanned Adobe PDF file, please contact the RMA Web 
Content Team at (816)823-4694 or by email at 
[email protected].

PRIVACY ACT:  Anyone is able to search the electronic form of all 
comments received for any dockets by the name of the person submitting 
the comment (or signing the comment, if submitted on behalf of an 
association, business, labor union, etc.). You may review the complete 
User Notice and Privacy Notice for Regulations.gov at http://www.regulations.gov/#!privacyNotice.

FOR FURTHER INFORMATION CONTACT: David L. Miller, Director, Reinsurance 
Services Division, Federal Crop Insurance Corporation, United States 
Department of Agriculture (USDA), 1400 Independence Avenue SW, Stop 
0801, Washington, DC 20250, telephone (202) 720-9830.

SUPPLEMENTARY INFORMATION:

Executive Orders 12866, 13563, and 13771

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility. The Office of 
Management and Budget (OMB) designated this rule as not significant 
under Executive Order 12866, ``Regulatory Planning and Review,'' and 
therefore, OMB has not reviewed this rule. The rule is not subject to 
Executive Order 13771, ``Reducing Regulation and Controlling Regulatory 
Costs.''

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by the Office of Management and Budget (OMB) under 
control number 0563-0069.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

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

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175

[[Page 5574]]

requires Federal agencies to consult and coordinate with tribes on a 
government-to-government basis on policies that have tribal 
implications, including regulations, legislative comments or proposed 
legislation, and other policy statements or actions that have 
substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes or on the 
distribution of power and responsibilities between the Federal 
Government and Indian tribes.
    FCIC has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to its knowledge, have tribal 
implications that require tribal consultation under E.O. 13175. If a 
Tribe requests consultation, FCIC will work with the Office of Tribal 
Relations to ensure meaningful consultation is provided where changes, 
additions and modifications identified herein are not expressly 
mandated by Congress.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act (Act) authorizes FCIC to 
waive collection of administrative fees from beginning farmers or 
ranchers and limited resource farmers. FCIC believes this waiver helps 
to ensure that small entities are given the same opportunities as large 
entities to manage their risks through the use of Federal crop 
insurance. A Regulatory Flexibility Analysis has not been prepared 
since this regulation does not have an impact on small entities, and, 
therefore, this regulation is exempt from the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 605). This regulation pertains to 
all legal entities wanting a Reinsurance Agreement, to insure financial 
stability and capacity under this regulation.

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. Interpretations of statutory and regulatory 
provisions are matters of general applicability and, therefore, no 
administrative appeals process is available and judicial review may 
only be brought to challenge the interpretation after seeking a 
determination of appeal ability by the Director of the National Appeals 
Division (NAD) in accordance with 7 CFR part 11. An interpretation of a 
policy provision not codified in the Code of Federal Regulations or any 
procedure used in the administration of any Federal crop insurance 
program are administratively appealable and the appeal provisions 
published at 7 CFR part 11 must be exhausted before any action for 
judicial review may be brought against FCIC.

Environmental Evaluation

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

List of Subjects in 7 CFR Part 400

    Administrative practice and procedure, Crop insurance, Reporting 
and recordkeeping requirements.

Proposed Rule

    Accordingly, as set forth in the preamble, FCIC proposes to amend 7 
CFR part 400 to read as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

0
1. The authority citation for 7 CFR part 400 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(o).

0
2. Revise Subpart L to read as follows:

Subpart L--Reinsurance Agreement--Standards for Approval; 
Regulations for the 2019 and Subsequent Reinsurance Years

Sec.
400.161 Definitions.
400.162 Qualification ratios.
400.163 Applicability.
400.164 Eligibility for a Reinsurance Agreement.
400.165 [Reserved]
400.166 [Reserved]
400.167 [Reserved]
400.168 [Reserved]
400.169 Disputes.
400.170 [Reserved]
400.171 [Reserved]
400.172 [Reserved]
400.173 [Reserved]
400.174 [Reserved]
400.175 [Reserved]
400.176 [Reserved]
400.177 [Reserved]


Sec.  400.161  Definitions.

    In addition to the terms defined in the Standard Reinsurance 
Agreement, Livestock Price Reinsurance Agreement and any other 
Reinsurance Agreement, the following terms as used in this rule are 
defined to mean:
    Annual statutory financial statement means the annual financial 
statement of a Company prepared in accordance with Statutory Accounting 
Principles and submitted to the state insurance department if required 
by any state in which the Company is licensed.
    Company means the insurance company that currently has or is 
applying to FCIC for a Reinsurance Agreement.
    FCIC means the Federal Crop Insurance Corporation as authorized in 
section 503 of the Federal Crop Insurance Act (7 U.S.C. 1503).
    MPUL means the maximum possible underwriting loss that a Company 
can sustain on policies it intends to reinsure after adjusting for the 
effect of any Reinsurance Agreement and any private reinsurance, as 
evaluated by FCIC.
    Plan of operation means the documentation and information submitted 
by a Company to apply for or maintain a Reinsurance Agreement as 
required by FCIC.
    Quarterly Statutory Financial Statement means the quarterly 
financial statement of a Company prepared in accordance with Statutory 
Accounting Principles and submitted to the state insurance department 
if required by any state in which the Company is licensed.
    Reinsurance Agreement means the Standard Reinsurance Agreement, 
Livestock Price Reinsurance Agreement and any other Reinsurance 
Agreement between the Company and FCIC.

[[Page 5575]]

Sec.  400.162  Qualification ratios.

    (a) The eighteen qualification ratios include:
    (1) Thirteen National Association of Insurance Commissioner's 
(NAIC's) Insurance Regulatory Information System (IRIS) ratios found in 
subsections (b)(1), (2), (3), (4), (5), (6), (7), (8), (9), (10), (11), 
(12), and (17) of this section and referenced in ``Using the NAIC 
Insurance Regulatory Information System'' distributed by NAIC, 1100 
Walnut St., Suite 1500, Kansas City, MO 64106-2197;
    (2) Three ratios used by A.M. Best Company found in subsections 
(b)(13), (15), and (16) of this section and referenced in Best's Key 
Rating Guide, A.M. Best, Ambest Road, Oldwick, N.J. 08858-0700;
    (3) One ratio found in paragraph (b)(14) of this section which is 
formulated by FCIC and is calculated the same as the One-Year Change to 
Surplus IRIS ratio but for a two-year period; and
    (4) One ratio found in paragraph (b)(18) of this section, which is 
reported on the annual statutory financial statement.
    (b) The Company shall provide an explanation for any ratio falling 
outside of the requirements stated below.

------------------------------------------------------------------------
                     Ratio                          Ratio requirement
------------------------------------------------------------------------
(1) Gross Premium Written to Policyholders                         <900%
 Surplus.......................................
(2) Net Premium Written to Policyholders                           <300%
 Surplus.......................................
(3) Change in Net Premiums Writings............              -33% to 33%
(4) Surplus Aid to Policyholders Surplus.......                     <15%
(5) Two-Year Overall Operating Ratio...........                    <100%
(6) Change in Policyholders Surplus............              -10% to 50%
(7) Investment Yield...........................             3.0% to 6.5%
(8) Liabilities to Liquid Assets...............                    <100%
(9) Gross Agents Balances to Policyholders                          <40%
 Surplus.......................................
(10) One Year Reserve Development to                                <20%
 Policyholders Surplus.........................
(11) Two Year Reserve Development to                                <20%
 Policyholders Surplus.........................
(12) Estimated Current Reserve Deficiency to                        <25%
 Policyholders Surplus.........................
(13) Combined Ratio after Policyholder Dividend                    <115%
(14) Two Year Change in Surplus................                    >-10%
(15) Quick Liquidity...........................                     >20%
(16) Return on Surplus.........................                     >-5%
(17) Net Change in Adjusted Policyholder                     -10% to 25%
 Surplus.......................................
(18) Risk Based Capital Ratio..................                    >200%
------------------------------------------------------------------------

Sec.  400.163  Applicability.

    The standards contained herein shall be applicable to a Company 
applying for and those maintaining a Reinsurance Agreement.


Sec.  400.164   Eligibility for a Reinsurance Agreement.

    FCIC will offer a Reinsurance Agreement to an eligible Company as 
determined by FCIC. To be eligible and qualify initially or thereafter 
for a Reinsurance Agreement with FCIC, a Company must:
    (a) Be licensed or admitted in any state, territory, or possession 
of the United States;
    (b) Be licensed or admitted, or use as a policy-issuing company an 
insurance company that is licensed or admitted, in each state where the 
Company will write policies under a Reinsurance Agreement;
    (c) Have surplus, as reported in its most recent Annual or 
Quarterly Statutory Financial Statement, that is at least equal to 
twice the MPUL amount for the Company's estimated retained premium 
submitted in its plan of operation.
    (d) The Company shall have the financial and operational resources, 
including but not limited to, organization, experience, internal 
controls, and technical skills, positive assessment of the ratio 
results appearing in Section 400.162 as well as meeting methodologies, 
data submission requirements and assessment appearing in Appendix II 
(Plan of Operations) of the Reinsurance Agreement to meet the 
requirements, including addressing reasonable risks, associated with a 
Reinsurance Agreement, as determined by FCIC.
    (e) The Company shall provide data and demonstrate a satisfactory 
performance record to obtain a Reinsurance Agreement and continue to 
hold a Reinsurance Agreement for the reinsurance year as determined by 
FCIC.


Sec.  400.165   [Reserved]


Sec.  400.166   [Reserved]


Sec.  400.167   [Reserved]


Sec.  400.168   [Reserved]


Sec.  400.169  Disputes.

    (a) If the Company believes that the FCIC has taken an action that 
is not in accordance with the provisions of a Reinsurance Agreement 
except compliance issues, it may request the Deputy Administrator of 
Insurance Services to make a final administrative determination 
addressing the disputed action. The Deputy Administrator of Insurance 
Services will render the final administrative determination of the FCIC 
with respect to the applicable actions. All requests for a final 
administrative determination must be in writing and submitted within 45 
days after receipt after the disputed action.
    (b) With respect to compliance matters, the Compliance Field Office 
renders an initial finding or outcome, permits the Company to respond, 
and then issues a final finding or outcome. If the Company believes 
that the Compliance Field Office's final finding or outcome is not in 
accordance with the applicable laws, regulations, custom or practice of 
the insurance industry, or FCIC approved policy and procedure, it may 
request, the Deputy Administrator of Compliance to make a final 
administrative determination addressing the disputed final finding or 
outcome. The Deputy Administrator of Compliance will render the final 
administrative determination of the FCIC with respect to these issues. 
All requests for a final administrative determination must be in 
writing and submitted within 45 days after receipt of the final finding 
or outcome.
    (c) A Company may also request reconsideration by the Deputy 
Administrator of Insurance Services of a decision of the FCIC rendered 
under any FCIC bulletin or directive which bulletin or directive does 
not interpret, explain, or restrict the terms of the Reinsurance 
Agreement. The Company, if it disputes the FCIC's determination, must 
request a reconsideration of that

[[Page 5576]]

determination in writing, within 45 days of the receipt of the 
determination. The determination of the Deputy Administrator of 
Insurance Services will be final and binding on the Company. Such 
determinations will not be appealable to the Board of Contract Appeals.
    (d) Appealable final administrative determinations of the FCIC 
under paragraph (a) or (b) of this section may be appealed to the Board 
of Contract Appeals in accordance with 48 CFR part 6102 and with the 
provisions 7 CFR part 24.


Sec.  400.170   [Reserved]


Sec.  400.171   [Reserved]


Sec.  400.172   [Reserved]


Sec.  400.173   [Reserved]


Sec.  400.174   [Reserved]


Sec.  400.175   [Reserved]


Sec.  400.176   [Reserved]


Sec.  400.177   [Reserved]

    Signed in Washington, DC, on February 1, 2018.
Heather Manzano,
Acting Manager, Federal Crop Insurance Corporation.
[FR Doc. 2018-02489 Filed 2-7-18; 8:45 am]
 BILLING CODE 3410-08-P