HR 2225 IH

To amend the Federal Crop Insurance Act to improve crop insurance coverage and administration, and for other purposes.

To amend the Federal Crop Insurance Act to improve crop insurance coverage and administration, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Crop Insurance Equity Act of 1999'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I--CROP INSURANCE COVERAGE

Sec. 101. Prevented planting.

Sec. 102. Alternative rating methodologies.

Sec. 103. Quality adjustment.

Sec. 104. Low-risk producer pilot program.

Sec. 105. Catastrophic risk protection.

Sec. 106. Loss adjustment.

Sec. 107. Cost of production plans of insurance.

Sec. 108. Discounts.

Sec. 109. Adjustments to subsidy levels.

Sec. 110. Sales closing dates.

Sec. 111. Assigned yields.

Sec. 112. Actual production history adjustment for disasters.

Sec. 113. Payment of portion of premium.

Sec. 114. Limitation on premiums included in underwriting gains.

TITLE II--ADMINISTRATION

Sec. 201. Board of Directors of Corporation.

Sec. 202. Office of Risk Management.

Sec. 203. Office of Private Sector Partnership.

Sec. 204. Penalties for false information.

Sec. 205. Regulations.

Sec. 206. Program compliance.

Sec. 207. Payments by cooperative associations.

Sec. 208. Limitation on double insurance.

Sec. 209. Consultation with State committees of Farm Service Agency.

Sec. 210. Records and reporting.

Sec. 211. Fees for plans of insurance.

Sec. 212. Flexible subsidy pilot program.

Sec. 213. Reinsurance agreements.

Sec. 214. Funding.

SEC. 101. PREVENTED PLANTING.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) is amended by adding at the end the following:

`(7) PREVENTED PLANTING-

`(A) IN GENERAL- The Corporation shall offer coverage for prevented planting of an agricultural commodity only as an endorsement to a policy.

`(B) EQUAL COVERAGE- For each agricultural commodity for which prevented planting coverage is available, the Corporation shall offer an equal level of prevented planting coverage.

`(C) PLANTING OF SUBSTITUTE AGRICULTURAL COMMODITIES- In the case of prevented planting coverage that is offered under this paragraph, the Corporation shall allow producers that have the coverage, and that are eligible to receive a prevented planting indemnity, to plant an agricultural commodity, other than the commodity covered by the prevented planting coverage, on the acreage that the producer has been prevented from planting to the original agricultural commodity.

`(D) INELIGIBILITY FOR COVERAGE- A substitute agricultural commodity described in subparagraph (C) shall not be eligible for coverage under a plan of insurance under this title.'.

SEC. 102. ALTERNATIVE RATING METHODOLOGIES.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) (as amended by section 101) is amended by adding at the end the following:

`(8) ALTERNATIVE RATING METHODOLOGIES-

`(A) IN GENERAL- Not later than September 30, 2000, the Corporation shall develop and implement alternative methodologies for rating plans of insurance under subsections (b) and (c), and rates for the plans of insurance, that take into account--

`(i) producers that elect not to participate in the Federal crop insurance program established under this title; and

`(ii) producers that elect only to obtain catastrophic risk protection under subsection (b).

`(B) REVIEW AND ADJUSTMENT- Effective for the 2001 and subsequent crop years, the Corporation shall review and make any necessary adjustments to methodologies and rates established under this paragraph, based on (as determined by the Corporation)--

`(i) expected future losses, with appropriate adjustment of any historical data used in rating to remove--

`(I) the impact of adverse selection; and

`(II) data that no longer reflects the productive capacity of the area;

`(ii) program errors; and

`(iii) any other factor that can cause errors in methodologies and rates.

`(C) IMPLEMENTATION- In developing, implementing, and adjusting rating methodologies and rates under this paragraph, the Corporation shall--

`(i) use methodologies for rating plans of insurance under subsections (b) and (c) that result in the lowest premiums payable by producers of an agricultural commodity in a geographic area, as determined by the Corporation; and

`(ii) update the manner in which rates are applied at the individual producer level, as determined by the Corporation.

`(D) PRIORITY- In developing, implementing, and adjusting alternative methodologies for rating plans of insurance under subsections (b) and (c) for agricultural commodities, the Corporation shall provide the highest priority to agricultural commodities with (as determined by the Corporation)--

`(i) the largest average acreage; and

`(ii) the lowest percentage of producers that purchased coverage under subsection (c).'.

SEC. 103. QUALITY ADJUSTMENT.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) (as amended by section 102) is amended by adding at the end the following:

`(9) QUALITY ADJUSTMENT POLICIES- The Corporation shall offer, only as an endorsement to a policy, coverage that permits a reduction in the quantity of production of an agricultural commodity produced during a crop year, or any similar adjustment, that results from the agricultural commodity not meeting the quality standards established in the policy.'.

SEC. 104. LOW-RISK PRODUCER PILOT PROGRAM.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) (as amended by section 103) is amended by adding at the end the following:

`(10) LOW-RISK PRODUCER PILOT PROGRAM-

`(A) IN GENERAL- For each of the 2000 through 2003 crop years, the Corporation shall carry out a pilot program that is designed to encourage participation in the Federal crop insurance program established under this title by producers who rarely suffer insurable losses.

`(B) SCOPE- The Corporation shall carry out the pilot program in at least 40 counties that are determined by the Corporation to be adequate to provide a comprehensive evaluation of the feasibility, effectiveness, and demand among producers for a low-risk producer program.

`(C) PREMIUM REFUND- Notwithstanding section 506(o) and subsection (d)(1), if a producer participating in the pilot program incurs a yield loss in any crop year that is more than 10 percent but not more than 35 percent of the yield determined under subsection (g), the Corporation shall--

`(i) refund all or part, as determined by the Corporation, of the premium that was paid by the producer for a plan of insurance for the crop that incurred the qualifying loss; or

`(ii) apply the amount to be refunded under clause (i) against the premium payable by the producer for equivalent coverage for the subsequent crop year.

`(D) REGULATIONS- The Corporation shall promulgate such regulations as are necessary to carry out the pilot program.'.

SEC. 105. CATASTROPHIC RISK PROTECTION.

Section 508(b)(2)(A) of the Federal Crop Insurance Act (7 U.S.C. 1508(b)(2)(A)) is amended--

(1) in clause (i), by striking `and' at the end;

(2) in clause (ii)--

(A) by striking `each of the 1999 and subsequent crop years' and inserting `the 1999 crop year'; and

(B) by striking the period at the end and inserting `; and'; and

(3) by adding at the end the following:

`(iii) in the case of each of the 2000 and subsequent crop years, catastrophic risk protection shall offer a producer coverage for a 60 percent loss in yield, on an individual yield or area yield basis, indemnified at 70 percent of the expected market price, or a comparable coverage (as determined by the Corporation).'.

SEC. 106. LOSS ADJUSTMENT.

Section 508(b)(11) of the Federal Crop Insurance Act (7 U.S.C. 1508(b)(11)) is amended by striking `11 percent' and all that follows through the end of the paragraph and inserting `$50 for each claim that is adjusted under this subsection.'.

SEC. 107. COST OF PRODUCTION PLANS OF INSURANCE.

(a) IN GENERAL- Section 508(c) of the Federal Crop Insurance Act (7 U.S.C. 1508(c)) is amended by striking paragraph (5) and inserting the following:

`(5) EXPECTED MARKET PRICE-

`(A) IN GENERAL- For the purposes of this title, the Corporation shall establish or approve the price level (referred to in this title as the `expected market price') of each agricultural commodity for which insurance is offered.

`(B) AMOUNT- The expected market price of an agricultural commodity--

`(i) except as otherwise provided in this subparagraph, shall be not less than the projected market price of the agricultural commodity, as determined by the Corporation;

`(ii) may be based on the actual market price of the agricultural commodity at the time of harvest, as determined by the Corporation; or

`(iii) in the case of cost of production or similar plans of insurance, shall be the projected cost of producing the agricultural commodity, as determined by the Corporation.'.

(b) CONFORMING AMENDMENTS- Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)) is amended--

(1) by striking paragraph (9); and

(2) by redesignating paragraph (10) as paragraph (9).

SEC. 108. DISCOUNTS.

Section 508(d) of the Federal Crop Insurance Act (7 U.S.C. 1508(d)) is amended by adding at the end the following:

`(3) DISCOUNTS-

`(A) IN GENERAL- Notwithstanding section 506(o) and paragraph (1), the Corporation shall provide a discount in the premium payable by the producer for a plan of insurance under subsections (b) and (c) for an agricultural commodity in a county if the producer--

`(i) during each of the preceding 5 consecutive crop years--

`(I) has obtained insurance under this title for the agricultural commodity; and

`(II) has not filed any claim under the insurance;

`(ii) if offered by the Corporation, elects to have unit coverage that reduces the risk of loss below the risk of loss that is expected for a unit comprised of all insurable acreage of the agricultural commodity in the county; or

`(iii) implements innovative farming management practices that reduce the risk of insurable loss, as determined by the Corporation.

`(B) AMOUNT-

`(i) IN GENERAL- Subject to clause (ii), the amount of the discount provided to a producer for a crop year under subparagraph (A) shall be determined by the Corporation.

`(ii) NO CLAIM DISCOUNT- The amount of the discount provided to a producer for a crop year under subparagraph (A)(i) shall increase for each additional consecutive crop year for which the producer is eligible for a discount under subparagraph (A)(i).'.

SEC. 109. ADJUSTMENTS TO SUBSIDY LEVELS.

(a) IN GENERAL- Section 508(e)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(e)(2)) is amended by striking subparagraphs (B) and (C) and inserting the following:

`(B) In the case of additional coverage below 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount shall be equal to the sum of--

`(i) 50 percent of the amount of the premium established under subsection (d)(2)(B)(i); and

`(ii) the amount of operating and administrative expenses determined under subsection (d)(2)(B)(ii).

`(C) In the case of additional coverage equal to or greater than 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount shall be equal to the sum of--

`(i) 50 percent of the amount of the premium established under subsection (d)(2)(C)(i); and

`(ii) the amount of operating and administrative expenses determined under subsection (d)(2)(C)(ii).'.

(b) APPLICATION- The amendment made by subsection (a) applies beginning with the 2000 crop year.

SEC. 110. SALES CLOSING DATES.

Section 508(f)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(f)(2)) is amended by striking the last sentence.

SEC. 111. ASSIGNED YIELDS.

Section 508(g)(2)(B) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2)(B)) is amended--

(1) by striking `assigned a yield' and inserting `assigned--

`(i) a yield';

(2) by striking the period at the end and inserting `; or'; and

(3) by adding at the end the following:

`(ii) a yield determined by the Corporation, in the case of--

`(I) a person that has not been actively engaged in farming for a share of the production of the insured crop for more than 2 crop years, as determined by the Secretary;

`(II) a producer that produces an agricultural commodity on land that has not been farmed by the producer; and

`(III) a producer that rotates a crop produced on a farm to a crop that has not been produced on the farm.'.

SEC. 112. ACTUAL PRODUCTION HISTORY ADJUSTMENT FOR DISASTERS.

Section 508(g)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2)) is amended by adding at the end the following:

`(E) SUBSTITUTION OF TRANSITIONAL YIELD- Effective beginning with the 2000 crop year, if the producer's yield of an agricultural commodity in any crop year is less than 85 percent of the transitional yield established by the Corporation for the agricultural commodity, the Corporation shall, at the option of the producer,

`(F) CORPORATION'S SHARE OF COSTS- In the case of any yield substitution under subparagraph (E), in addition to any other authority to pay any portion of the premium and indemnity, the Corporation shall pay--

`(i) the portion of the premium or indemnity that represents the increase in premium associated with the substitution of the transitional yield under subparagraph (E);

`(ii) all additional indemnities associated with the substitution; and

`(iii) any amounts that result from the difference in the administrative and operating expenses owed to an approved insurance provider as the result of the substitution.'.

SEC. 113. PAYMENT OF PORTION OF PREMIUM.

Section 508(h)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(2)) is amended in the second sentence by inserting before the period at the end the following: `, except that the Corporation shall not pay any portion of the premium for any plan of insurance that offers coverage for losses associated with a change in price'.

SEC. 114. LIMITATION ON PREMIUMS INCLUDED IN UNDERWRITING GAINS.

Section 508(k) of the Federal Crop Insurance Act (7 U.S.C. 1508(k)) is amended by adding at the end the following:

`(8) LIMITATION ON PREMIUMS INCLUDED IN UNDERWRITING GAINS- Notwithstanding any other provision of law, the reinsurance agreements of the Corporation shall require that not more than 50 percent of any premium for catastrophic risk protection under subsection (b) be included in the calculation of gains or losses of an approved insurance provider unless the loss ratio for catastrophic risk protection exceeds 1.0.'.

SEC. 201. BOARD OF DIRECTORS OF CORPORATION.

Section 505 of the Federal Crop Insurance Act (7 U.S.C. 1505) is amended by striking subsection (a) and inserting the following:

`(a) BOARD OF DIRECTORS-

`(1) IN GENERAL- The management of the Corporation shall be vested in a Board subject to the general supervision of the Secretary.

`(2) COMPOSITION- The Board shall consist of--

`(A) 4 members who are active agricultural producers with or without crop insurance, with 1 member appointed from each of the 4 regions of the United States (as determined by the Secretary);

`(B) 1 member who is active in the crop insurance business;

`(C) 1 member who is active in the reinsurance business;

`(D) the Under Secretary for Farm and Foreign Agricultural Services;

`(E) the Under Secretary for Rural Development; and

`(F) the Chief Economist of the Department of Agriculture.

`(3) APPOINTMENT AND TERMS OF PRIVATE SECTOR MEMBERS- The members of the Board described in subparagraphs (A), (B), and (C) of paragraph (2)--

`(A) shall be appointed by, and hold office at the pleasure of, the Secretary;

`(B) shall not be otherwise employed by the Federal Government;

`(C) shall be appointed to staggered 4-year terms, as determined by the Secretary; and

`(D) shall serve not more than 2 consecutive terms.

`(4) CHAIRPERSON- The Board shall select a member of the Board described in subparagraph (A), (B), or (C) of paragraph (2) to serve as Chairperson of the Board.

`(5) STAFF- The Board shall employ or contract with 1 or more individuals who are knowledgeable and experienced in quantitative mathematics and actuarial rating to assist the Board in reviewing and approving policies and materials with respect to plans of insurance authorized or submitted under section 508.'.

SEC. 202. OFFICE OF RISK MANAGEMENT.

(a) ESTABLISHMENT- Section 226A(a) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6933(a)) is amended by striking `independent Office of Risk Management' and inserting `Office of Risk Management, which shall be under the direction of the Board of Directors of the Federal Crop Insurance Corporation'.

(b) FUNCTIONS- Section 226A(b) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6933(b)) is amended by striking paragraph (1) and inserting the following:

`(1) Assistance to the Board in developing, reviewing, and recommending plans of insurance under section 508(a)(7) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)(7)) to ensure that each agricultural commodity (including each new or speciality crop) is adequately served by plans of insurance.'.

SEC. 203. OFFICE OF PRIVATE SECTOR PARTNERSHIP.

The Federal Crop Insurance Act is amended by inserting after section 507 (7 U.S.C. 1507) the following:

`SEC. 507A. OFFICE OF PRIVATE SECTOR PARTNERSHIP.

`(a) ESTABLISHMENT- The Secretary shall establish and maintain in the Department an Office of Private Sector Partnership, which shall be under the direction of the Board.

`(b) FUNCTIONS- The Office shall--

`(1) provide at least monthly reports to the Board on crop insurance issues, which shall be based on comments received from producers, approved insurance providers, and other sources that the Office considers appropriate;

`(2)(A) review policies and materials with respect to--

`(i) subsidized plans of insurance authorized under section 508; and

`(ii) unsubsidized plans of insurance submitted to the Board under section 508(h); and

`(B) make recommendations to the Board with respect to approval of the policies and materials;

`(3) administer the reinsurance functions described in section 508(k) on behalf of the Corporation;

`(4) review and make recommendations to the Board with respect to methodologies for rating plans of insurance under this title; and

`(5) perform such other functions as the Board considers appropriate.

`(c) ADMINISTRATOR- The Office shall be headed by an Administrator who shall be appointed by the Secretary.

`(d) STAFF- The Administrator shall appoint such employees pursuant to title 5, United States Code, as are necessary for the administration of the Office, including

SEC. 204. PENALTIES FOR FALSE INFORMATION.

Section 506(n)(1) of the Federal Crop Insurance Act (7 U.S.C. 1506(n)(1)) is amended--

(1) in subparagraph (A), by inserting `for each claim' after `$10,000'; and

(2) in subparagraph (B), by striking `noninsured assistance' and inserting `any loan, payment, or benefit described in section 1211 of the Food Security Act of 1985 (16 U.S.C. 3811)'.

SEC. 205. REGULATIONS.

Section 506(p) of the Federal Crop Insurance Act (7 U.S.C. 1506(p)) is amended--

(1) by striking `The Secretary' and inserting the following:

`(1) IN GENERAL- The Secretary'; and

(2) by adding at the end the following:

`(2) TERMS OF INSURANCE-

`(A) IN GENERAL- Regulations issued by the Secretary and the Corporation specifying the terms of insurance under section 508 shall be issued without regard to--

`(i) the notice and comment provisions of section 553 of title 5, United States Code;

`(ii) the Statement of Policy of the Secretary of Agriculture effective July 24, 1971 (36 Fed. Reg. 13804), relating to notices of proposed rulemaking and public participation in rulemaking; and

`(iii) chapter 35 of title 44, United States Code (commonly known as the `Paperwork Reduction Act').

`(B) CONGRESSIONAL REVIEW OF AGENCY RULEMAKING- In carrying out this paragraph, the Secretary shall use the authority provided under section 808 of title 5, United States Code.'.

SEC. 206. PROGRAM COMPLIANCE.

Section 506(q) of the Federal Crop Insurance Act (7 U.S.C. 1506(q)) is amended--

(1) by redesignating paragraph (2) as paragraph (6); and

(2) by striking paragraph (1) and inserting the following:

`(1) IN GENERAL- Not later than 180 days after the date of enactment of the Crop Insurance Equity Act of 1999, the Corporation shall establish a program for monitoring compliance with this title by all Federal crop insurance participants, including producers, agents, adjusters, and approved insurance providers.

`(2) CONSULTATION- The Corporation shall consult with approved insurance providers in developing the compliance program.

`(3) OVERSIGHT OF LOSS ADJUSTMENT- As part of the compliance program, the Corporation shall provide for a mechanism to independently review the performance of loss adjusters.

`(4) PROGRAM REVIEW- Not later than 90 days after the date of enactment of the Crop Insurance Equity Act of 1999, the Corporation shall submit to the Board and the Office of Private Sector Partnership for their review the proposed compliance program under this subsection.

`(5) ANNUAL REPORTS- Beginning with fiscal year 2001, the Corporation shall submit an annual report to the Committee on Agriculture of the House of Representatives, the Committee on Agriculture, Nutrition, and Forestry of the Senate, the Board, and the Office of Private Sector Partnership concerning the compliance program established under this subsection, including any recommendations for legislative or administrative changes that could further improve program compliance.'.

SEC. 207. PAYMENTS BY COOPERATIVE ASSOCIATIONS.

Section 507(e) of the Federal Crop Insurance Act (7 U.S.C. 1507(e)) is amended--

(1) by striking `(e) In' and inserting the following:

`(e) COOPERATIVE ASSOCIATIONS-

`(1) IN GENERAL- In'; and

(2) by adding at the end the following:

`(2) PAYMENTS- A cooperative association described in paragraph (1) that is licensed and acts as an agent or approved insurance provider with respect to any plan of insurance offered under this title may provide to the members of the association all or part of any funds received from the Corporation under this title.'.

SEC. 208. LIMITATION ON DOUBLE INSURANCE.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) (as amended by section 104) is amended by adding at the end the following:

`(11) LIMITATION ON DOUBLE INSURANCE- The Corporation may offer plans of insurance or reinsurance for only 1 agricultural commodity on specific acreage during a crop year, unless--

`(A) there is an established practice of double-cropping in an area, as determined by the Corporation;

`(B) the additional plan of insurance is offered with respect to an agricultural commodity that is customarily double-cropped in the area; and

`(C) the producer has a history of double cropping or the acreage has historically been double-cropped.'.

SEC. 209. CONSULTATION WITH STATE COMMITTEES OF FARM SERVICE AGENCY.

Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a)) (as amended by section 208) is amended by adding at the end the following:

`(12) CONSULTATION WITH STATE COMMITTEES OF FARM SERVICE AGENCY- The Corporation shall establish a mechanism under which State committees of the Farm Service Agency are consulted concerning policies of insurance offered in a State under this title.'.

SEC. 210. RECORDS AND REPORTING.

(a) CATASTROPHIC RISK PROTECTION- Section 508(f)(3)(A) of the Federal Crop Insurance Act (7 U.S.C. 1508(f)(3)(A)) is amended by striking `provide, to the extent required by the Corporation,' and inserting `to the extent required by the Corporation, provide to the Secretary, acting through the Farm Service Agency,'.

(b) NONINSURED CROP DISASTER ASSISTANCE PROGRAM- Section 196(b) of the Agricultural Market Transition Act (7 U.S.C. 7333(b)) is amended--

(1) by striking paragraph (2) and inserting the following:

`(2) RECORDS- To be eligible for assistance under this section, a producer shall provide annually to the Secretary, acting through the Farm Service Agency, records of crop acreage, acreage yields, and production for each eligible crop.'; and

(2) in paragraph (3), by inserting `annual' after `shall provide'.

SEC. 211. FEES FOR PLANS OF INSURANCE.

Section 508(h)(5) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(5))) is amended--

(1) by striking `Any policy' and inserting the following:

`(A) IN GENERAL- Any policy'; and

(2) by adding at the end the following:

`(B) FEES FOR NEW PLANS OF INSURANCE-

`(i) IN GENERAL- If an approved insurance provider elects to sell a plan of insurance that was developed by another approved insurance provider after the date of enactment of this subparagraph and the plan of insurance offered coverage that was not available for any crop at the time the plan of insurance was approved by the Board (as determined by the Corporation), the approved insurance provider that developed the plan of insurance shall have the right to receive a fee from the approved insurance provider that elects to sell the plan of insurance.

`(ii) AMOUNT-

`(I) IN GENERAL- Subject to subclause (II), the amount of the fee that is payable by an approved insurance provider for a plan of insurance under clause (i) shall be an amount that is--

`(bb) approved by the Board.

`(II) APPROVAL- The Board shall not approve the amount of a fee under clause (i) if the amount of the fee unnecessarily inhibits the use of the plan of insurance, as determined by the Board.

`(C) PAYMENTS- The Corporation shall annually--

`(i) collect from an approved insurance provider the amount of any fees that are payable by the approved insurance provider under subparagraph (B); and

`(ii) credit any fees that are payable to an approved insurance provider under subparagraph (B).'.

SEC. 212. FLEXIBLE SUBSIDY PILOT PROGRAM.

Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)) is amended by adding at the end the following:

`(11) FLEXIBLE SUBSIDY PILOT PROGRAM- For each of the 2000 through 2002 crop years, the Corporation shall carry out a pilot program under which flexible subsidies are provided under this title to encourage private sector innovation through exclusive marketing rights and premium rate competition.'.

SEC. 213. REINSURANCE AGREEMENTS.

Section 508(k) of the Federal Crop Insurance Act (7 U.S.C. 1508(k)) is amended by striking paragraph (3) and inserting the following:

`(3) REINSURANCE AGREEMENTS-

`(A) SHARE OF RISK- Each reinsurance agreement of the Corporation with a reinsured company shall require the reinsured company to bear a sufficient share of any potential loss under the agreement so as to ensure that the reinsured company will sell and service policies of insurance in a sound and prudent manner, taking into consideration the financial condition of the reinsured company and the availability of private reinsurance.

`(B) COMPLIANCE- To promote program compliance and integrity, the Corporation, after notice and an opportunity for a hearing on the record--

`(i)(I) shall assess civil fines in an amount not to exceed $10,000 per violation against agents, loss adjusters, and approved insurance providers that are determined by the Corporation to have recurring compliance problems; and

`(II) may deposit any civil fines collected under subclause (I) in the insurance fund established under section 516(c); and

`(ii) shall disqualify the agents, loss adjusters, and approved insurance providers described in clause (i)(I) from participation in the Federal crop insurance program for a period not to exceed 5 years.

`(C) REVIEW OF AGREEMENTS- As soon as practicable after the date of enactment of this subparagraph and regularly thereafter, in consultation with the Office of Private Sector Partnership, the Corporation shall review the Standard Reinsurance Agreement issued by the Corporation to ensure that the allocation of risk between the Corporation and the reinsured

SEC. 214. FUNDING.

Section 516 of the Federal Crop Insurance Act (7 U.S.C. 1516) is amended--

(1) in subsection (a)(2)--

(A) in subparagraph (A), by striking `and' at the end;

(B) in subparagraph (B), by striking the period at the end and inserting `; and'; and

(C) by adding at the end the following:

`(C) salaries and expenses of the Office of Private Sector Partnership.';

(2) in subsection (b)(1)--

(A) in subparagraph (B), by striking `; and' and inserting a semicolon;

(B) in subparagraph (C), by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following:

`(D) salaries and expenses of the Office of Private Sector Partnership, but not to exceed $5,000,000 for each fiscal year;

`(E) administrative expenses of collecting information under section 508(f)(3); and

`(F) payment of fees in accordance with section 508(h)(5)(B).'; and

(3) in subsection (c)(1), by inserting `, fees under section 508(h)(5)(B), civil fines under section 508(k)(3)(B)(i)(II),' after `premium income'.