S 1666 IS

To provide risk reduction assistance to agricultural producers, and for other purposes.

To provide risk reduction assistance to agricultural producers, 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 `Farmers' Risk Management 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--RISK MANAGEMENT PAYMENTS

Sec. 101. Definitions.

Sec. 102. Risk management contract.

Sec. 103. Administrative provisions.

Sec. 104. Repeal; funding.

Sec. 105. Crops.

TITLE II--CROP INSURANCE

Sec. 201. Sanctions for program compliance and fraud.

Sec. 202. Oversight of loss adjustment.

Sec. 203. Revenue insurance pilot program.

Sec. 204. Reinsurance agreements.

Sec. 205. Reduction in underwriting gains and losses from catastrophic risk protection.

Sec. 206. Whole farm revenue insurance pilot program.

Sec. 207. Product innovation and rate competition pilot program.

Sec. 208. Limitation on double insurance.

TITLE III--REGULATIONS

Sec. 301. Regulations.

SEC. 101. DEFINITIONS.

In this title:

(1) ACTUAL PRODUCTION HISTORY- The term `actual production history' means a determination by the Corporation that establishes the average production (yield and acreage) for the 2000 crop of an agricultural commodity on the farm in accordance with section 508(g)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2)).

(2) AGRICULTURAL COMMODITY- The term `agricultural commodity' means each agricultural commodity specified in section 518 of the Federal Crop Insurance Act (7 U.S.C. 1518), excluding livestock, that is insurable, as determined by the Corporation.

(3) APPLICABLE CROP- The term `applicable crop' means each of the 2001 through 2004 crops of an agricultural commodity produced by a producer.

(4) APPLICABLE YEAR- The term `applicable year' means the year in which--

(A) the applicable crop is produced on the farm of a producer; and

(B) the producer elects to receive a risk management payment under a risk management contract.

(5) ASSIGNED YIELD- The term `assigned yield' means a yield assigned by the Corporation to determine the production of a producer (including a new producer and a producer that has not previously purchased crop insurance for an agricultural commodity) that--

(A) is determined by the Corporation in accordance with section 508(g)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(g)(2)); and

(B) is assigned to a producer if the producer cannot establish an actual production history.

(6) CORPORATION- The term `Corporation' means the Federal Crop Insurance Corporation.

(7) PRICE LEVEL- The term `price level' means the price level for an agricultural commodity on a yield and loss basis that is the average price level established by the Corporation in accordance with section 508(c)(5) of the Federal Crop Insurance Act (7 U.S.C. 1508(c)(5)) for each of the 1997 through 1999 crops of the agricultural commodity, as determined by the Corporation.

(8) PRINCIPAL AGRICULTURAL COMMODITY- The term `principal agricultural commodity' means any commodity (including livestock and a commodity that is not insurable under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.)) produced on the farm of a producer that comprises a significant percentage of the value of all commodities produced on the farm, as determined by the Secretary.

(9) PRODUCER- The term `producer' means a person that is at risk in the production of an agricultural commodity for which a risk management payment under a risk management contract is sought for an applicable year.

(10) REGULATED EXCHANGE- The term `regulated exchange' means a board of trade (as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)) that is designated as a contract market under section 2(a)(1)(B) of that Act (7 U.S.C. 2a).

(11) RISK MANAGEMENT CONTRACT- The term `risk management contract' means a contract entered into under section 102 for an applicable crop of an agricultural commodity of a producer.

(12) SECRETARY- The term `Secretary' means the Secretary of Agriculture.

SEC. 102. RISK MANAGEMENT CONTRACT.

(a) OFFER AND CONSIDERATION-

(1) OFFER- The Secretary shall offer to enter into a risk management contract for the 2001 through 2004 crops with each producer that is eligible to obtain a plan of insurance under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) for an agricultural commodity of a producer.

(2) TERMS-

(A) RISK MANAGEMENT PAYMENT- Under a risk management contract, for each agricultural commodity produced by a producer for an applicable crop, the Secretary shall pay the producer a risk management payment.

(B) BASIS FOR PAYMENT- The amount of a risk management payment shall be based on

(C) ELECTION OF PRODUCER- A producer may, for the applicable year--

(i) obtain a risk management payment; or

(ii) have an equal amount credited by the Corporation to the premium owed by the producer for 1 or more plans of Federal crop insurance purchased for the applicable year.

(D) QUALIFYING RISK MANAGEMENT PRACTICES- In exchange for the benefit offered under subparagraph (A), a producer shall use at least 2 qualifying risk management practices on the farm as provided in subsection (b).

(b) QUALIFYING RISK MANAGEMENT PRACTICES- To be eligible for a risk management payment under a risk management contract for an applicable crop, a producer shall obtain or use for the applicable crop at least 2 of the following qualifying risk management practices:

(1) CROP INSURANCE- A producer may obtain Federal crop insurance under the Federal Crop Insurance Act (7 U.S.C. 1501 et seq.) or private crop insurance (such as hail coverage) for a principal agricultural commodity produced on the farm of the producer for the applicable crop, at a level of coverage that is at least equivalent to catastrophic risk protection.

(2) FUTURE OR OPTION- A producer may enter into a future or option for a principal agricultural commodity produced on the farm of the producer for the applicable crop on a regulated exchange that is (as determined by the Secretary)--

(A)(i) in the case of a future, at least 1 regulated futures contract (as defined in section 1256(g) of the Internal Revenue Code of 1986); and

(ii) in the case of an option, at least 1 listed option (as defined in section 1256(g) of that Code); and

(B) a hedging transaction (as defined in section 1256(e)(2) of that Code) involving a principal agricultural commodity that is used to reduce production, price, or revenue risk.

(3) AGRICULTURAL TRADE OPTION- A producer may purchase, on other than a regulated exchange, an agricultural trade option for the applicable crop of a principal agricultural commodity produced on the farm of the producer that (as determined by the Secretary)--

(A) provides coverage for at least 10 percent of the estimated monetary value of the principal agricultural commodity;

(B) is an equity option (as defined in section 1256(g) of the Internal Revenue Code of 1986); and

(C) is a hedging transaction (as defined in section 1256(e)(2) of that Code) involving a principal agricultural commodity that is used to reduce production, price, or revenue risk.

(4) CASH FORWARD OR OTHER MARKETING CONTRACT- A producer may enter into a cash forward or other type of marketing contract for at least 20 percent of the monetary value of a principal agricultural commodity produced on the farm of the producer for the applicable crop, as determined by the Secretary.

(5) TRUST- A producer may make a deposit of an amount equal to at least 25 percent of the risk management payment of the producer for the applicable year into a trust authorized by statute for eligible farming businesses that may be established to accept tax deductible contributions.

(6) AGRICULTURAL MARKETING AND RISK MANAGEMENT EDUCATION- A producer may attend and complete in the applicable year an agricultural marketing or risk management class or seminar approved by the Secretary, including a class or seminar conducted by a broker who is licensed by a regulated exchange.

(7) FINANCIAL RISK REDUCTION-

(A) IN GENERAL- A producer may use at least 50 percent of the risk management payment of the producer for the applicable year to achieve, as determined by the Secretary--

(i) a reduction of farm financial debt in a manner that reduces farm business leverage; or

(ii) an increase of farm business liquidity.

(B) NOTICE AND COMMENT- The application of the notice and comment provisions of section 553 of title 5, United States Code, to this paragraph shall not delay the implementation of the other paragraphs of this subsection by the Secretary.

(8) DIVERSIFICATION-

(A) IN GENERAL- A producer may diversify production on the farm of the producer by producing at least 1 additional commodity on the farm or by significantly increasing farm enterprise diversification in the applicable year, as determined by the Secretary.

(B) NOTICE AND COMMENT- The application of the notice and comment provisions of section 553 of title 5, United States Code, to this paragraph shall not delay the implementation of the other paragraphs of this subsection by the Secretary.

(c) DETERMINATION OF RISK MANAGEMENT PAYMENT-

(1) AMOUNT AVAILABLE FOR EACH APPLICABLE YEAR- The Secretary shall, to the maximum extent practicable, expend $1,275,000,000 for each of the 2001 through 2004 crops to satisfy the obligations of the Secretary under all risk management contracts.

(2) CALCULATION- A risk management payment for an agricultural commodity produced on the farm of a producer for an applicable crop shall be equal to the product obtained by multiplying--

(A)(i) the actual production history of the producer; or

(ii) if an actual production history is not available, an assigned yield;

(B) the price level for the agricultural commodity; and

(C) subject to paragraph (1), a payment rate determined by the Secretary.

SEC. 103. ADMINISTRATIVE PROVISIONS.

(a) CERTIFICATION-

(1) IN GENERAL- Not later than April 15 of the year following an applicable year, a producer shall submit to the Secretary a risk management practices form that describes the qualifying risk management practices that were obtained or used by the producer during the applicable year.

(2) TIMING- The Secretary may not require a producer to submit the information described in paragraph (1) prior to April 15 of the year following the applicable year.

(3) CERTIFICATION OVER THE INTERNET- The Secretary shall, to the maximum extent practicable, facilitate the certification process required under this paragraph by using the Internet.

(b) COMPLIANCE- The Secretary may perform random audits of producers that obtain a risk management payment to ensure that the producers obtained or used the qualifying risk management practices described in the form.

(c) TIMING OF BENEFITS-

(1) RISK MANAGEMENT PAYMENT-

(A) IN GENERAL- For each applicable crop, at the option of a producer that enters into a risk management contract, the Secretary shall pay the producer the full amount (or such portion as the producer may specify) of the risk management payment required to be paid for the applicable year at such time or times during that year as the producer may specify.

(B) LIMITATION- The payment of a risk management payment (or portion of a risk management payment) under this paragraph shall not occur prior to--

(i) for the 2001 crop, October 1, 2000;

(ii) for the 2002 crop, October 1, 2001;

(iii) for the 2003 crop, October 1, 2002; and

(iv) for the 2004 crop, October 1, 2003.

(2) CREDIT TO PREMIUM OWED- For each applicable crop, a producer that elects to have an amount equal to the risk management payment of the producer credited by the Corporation to the premium owed for a plan of Federal crop insurance for an applicable crop shall receive the benefit at the time the premium is paid by the producer.

(d) VIOLATION OF RISK MANAGEMENT CONTRACT- If a producer has accepted a risk management payment for an applicable year and the producer fails to comply with subsection (a)(1) or section 102(b) with respect to the applicable year, the producer shall refund to the Secretary an amount equal to the risk management payment.

(e) ASSIGNMENT AND SHARING OF BENEFITS-

(1) ASSIGNMENT OF BENEFITS- Assignment of a benefit provided under this title shall be subject to section 8(g) of the Soil Conservation and Domestic Allotment Act (16 U.S.C. 590h(g)).

(2) NOTICE- The producer making the assignment, or the assignee, shall provide the Secretary with notice, in such manner as the Secretary may require in a risk management contract, of any assignment.

(3) SHARING OF BENEFITS- The Secretary shall provide for the sharing of benefits under this title among all producers that are at risk in the production of an applicable crop on a fair and equitable basis.

(f) USE OF COMMODITY CREDIT CORPORATION- The Secretary shall carry out this title using the funds, facilities, and authorities of the Commodity Credit Corporation.

SEC. 104. REPEAL; FUNDING.

(a) REPEAL- This title (other than this section) is repealed effective September 30, 2004.

(b) FUNDING- Effective beginning September 30, 2004, the Secretary may not use the funds of the Commodity Credit Corporation, the Federal Crop Insurance Corporation, or funds under any provision of law to provide risk management payments under this title or any other provision of law.

(c) EFFECT ON RISK MANAGEMENT PAYMENTS OR REDUCTIONS IN PREMIUM- This section shall not affect any requirements imposed on the Secretary or a producer under this title (as in effect before September 30, 2004).

SEC. 105. CROPS.

This title shall apply to each applicable crop.

SEC. 201. SANCTIONS FOR PROGRAM COMPLIANCE AND FRAUD.

(a) IN GENERAL- Section 506 of the Federal Crop Insurance Act (7 U.S.C. 1506) is amended by striking subsection (n) and inserting the following:

`(n) SANCTIONS-

`(1) FALSE INFORMATION- A producer, agent, loss adjuster, approved insurance provider, or other person that willfully and intentionally provides any false or inaccurate information to the Corporation or to an approved insurance provider with respect to a policy or plan of insurance under this title may, after notice and an opportunity for a hearing on the record, be subject to 1 or more of the sanctions described in paragraph (3).

`(2) COMPLIANCE- An agent, loss adjuster, approved insurance provider, or other person that is determined by the Corporation to have willfully and intentionally failed to comply with a requirement of the Corporation or the Standard Reinsurance Agreement may, after notice and an opportunity for a hearing on the record, be subject to 1 or more of the sanctions described in paragraph (3).

`(3) AUTHORIZED SANCTIONS- If the Secretary determines that a person covered by this subsection has committed a material violation under paragraph (1) or (2), the following sanctions may be imposed:

`(A) CIVIL FINES- A civil fine may be imposed for each violation in an amount not to exceed the greater of--

`(i) the amount of the pecuniary gain obtained as a result of the false or inaccurate information provided; or

`(ii) $10,000.

`(B) PRODUCERS- In the case of a violation committed by a producer, the producer may be disqualified for a period of up to 5 years from--

`(i) receiving any monetary or nonmonetary benefit provided--

`(I) under this title;

`(II) the Agricultural Market Transition Act (7 U.S.C. 7201 et seq.), including the noninsured crop disaster assistance program under section 196 of that Act (7 U.S.C. 7333);

`(III) the Agricultural Act of 1949 (7 U.S.C. 1421 et seq.);

`(IV) the Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq.);

`(V) the Agricultural Adjustment Act of 1938 (7 U.S.C. 1281 et seq.);

`(VI) title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et seq.); or

`(VII) the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.); and

`(ii) receiving any monetary or nonmonetary benefit provided under any law to assist a producer of an agricultural commodity affected by a crop loss or a decline in the prices of agricultural commodities.

`(C) OTHER PERSONS- In the case of a violation committed by an agent, loss adjuster, approved insurance provider, or other person (other than a producer), the violator may be disqualified for a period of up to 5 years from participating in any program, or receiving any benefit, under this title.

`(4) ASSESSMENT OF SANCTION- The Secretary shall consider the gravity of the violation of the person covered by this subsection in determining--

`(A) whether to impose a sanction under this subsection; and

`(B) the amount of the sanction to be imposed.

`(5) DISCLOSURE OF SANCTIONS- Each policy or plan of insurance under this title shall prominently indicate the sanctions prescribed under paragraph (3) for willfully and intentionally--

`(A) providing false or inaccurate information to the Corporation or to an approved insurance provider; or

`(B) failing to comply with a requirement of the Corporation or the Standard Reinsurance Agreement.

`(6) INSURANCE FUND- Any funds collected under this subsection shall be deposited into the insurance fund established under section 516(c).'.

(b) CONFORMING AMENDMENTS- Section 516(c) of the Federal Crop Insurance Act (7 U.S.C. 1516(c)) is amended by striking paragraph (1) and inserting the following:

`(1) IN GENERAL- There is established the Insurance Fund, which shall include (to remain available without fiscal year limitation)--

`(A) premium income;

`(B) amounts made available under subsection (a)(2); and

`(C) civil fines collected under section 508(k)(3)(B)(i)(II).'.

SEC. 202. OVERSIGHT OF LOSS ADJUSTMENT.

Section 506(q) of the Federal Crop Insurance Act (7 U.S.C. 1506(q)) is amended by adding at the end the following:

`(3) OVERSIGHT OF LOSS ADJUSTMENT- The Corporation shall--

`(A) develop procedures for an annual review by an approved insurance provider of the performance of each loss adjuster used by the approved insurance provider;

`(B) oversee the annual review conducted by each approved insurance provider; and

`(C) consult with each approved insurance provider regarding any remedial action that is

`(4) COMPLIANCE REPORTS- Not later than the end of each fiscal year, the Corporation shall submit, to the Committee on Agriculture of the House of Representatives, the Committee on Agriculture, Nutrition, and Forestry of the Senate, and the Board, a report concerning compliance by approved insurance providers and loss adjusters with this title, including any recommendations for legislative or administrative changes that could further improve compliance.'.

SEC. 203. REVENUE INSURANCE PILOT PROGRAM.

Section 508(h)(9)(A) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(9)(A)) is amended by striking `crop years 1997, 1998, 1999, and 2000,' and inserting `the 1999 through 2004 crops,'.

SEC. 204. REDUCTION IN UNDERWRITING GAINS AND LOSSES FROM CATASTROPHIC RISK PROTECTION.

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) REDUCTION IN UNDERWRITING GAINS AND LOSSES FROM CATASTROPHIC RISK PROTECTION- Effective for each of the 2001 through 2004 reinsurance years, notwithstanding any other provision of law, the reinsurance agreements of the Corporation shall require that 50 percent of any premiums or losses for catastrophic risk protection policies under subsection (b) be included in the calculation of gains or losses of an approved insurance provider.'.

SEC. 205. WHOLE FARM REVENUE INSURANCE PILOT PROGRAM.

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

`(4) WHOLE FARM REVENUE INSURANCE PILOT PROGRAM-

`(A) DEFINITION OF AGRICULTURAL ENTERPRISES- In this paragraph, the term `agricultural enterprises' means the production and marketing of agricultural commodities and livestock on a farm.

`(B) PURPOSE- The purpose of this paragraph is to authorize the Corporation to conduct a pilot program to--

`(i) determine whether whole farm revenue insurance is a good risk management tool for agricultural enterprises on a farm; and

`(ii) accumulate actuarial and rating data necessary to establish permanent whole farm revenue insurance coverage.

`(C) AUTHORITY- The Corporation shall conduct a pilot program under which a producer of agricultural commodities or livestock may obtain insurance that guarantees a level of revenue for agricultural enterprises on the farm of the producer.

`(D) REVENUE GUARANTEE- The amount of the revenue guarantee for agricultural enterprises on the farm of a producer for a taxable year shall be equal to the product obtained by multiplying--

`(i) the coverage level; by

`(ii) the lesser of--

`(I) the average adjusted gross income for the previous 5 taxable years, determined by taking into account only items of income, gain, deduction, or loss allocable to agricultural enterprises on the farm, as determined by the Corporation; or

`(II) the estimated revenue of the producer that will be earned from agricultural enterprises on the farm of the producer for the applicable year, as determined by the Corporation.

`(E) COVERAGE LEVELS- A participating producer may elect a coverage level under this paragraph that is 65, 75, or 80 percent of the average adjusted gross income of the producer, as determined under subparagraph (D)(i).

`(F) COVERAGE; LIMITATIONS-

`(i) IN GENERAL- Only revenue earned from agricultural enterprises on the farm of a producer shall be guaranteed under this paragraph at the coverage level selected by the producer.

`(ii) ALL AGRICULTURAL COMMODITIES AND LIVESTOCK- Revenue from all agricultural enterprises involving agricultural commodities and livestock produced on the farm of a producer, including agricultural commodities and livestock that were not insurable on the date of enactment of this paragraph, shall be guaranteed under this paragraph.

`(iii) PREMIUM LIMITATION-

`(I) DEFINITION OF PREMIUM- In this clause, the term `premium' means the aggregate premium paid by all insured persons covered by the pilot program authorized under this paragraph for a reinsurance year, excluding the part of the premium paid by the Corporation.

`(II) LIMITATION- The total amount of premiums shall not exceed--

`(bb) $15,000,000 for the 2002 reinsurance year;

`(cc) $25,000,000 for the 2003 reinsurance year; and

`(dd) $40,000,000 for the 2004 reinsurance year.

`(iv) AREA LIMITATION-

`(I) IN GENERAL- The Corporation shall the limit the number of counties in which producers are eligible to participate in the pilot program authorized under this paragraph.

`(II) STANDARDS- In carrying out subclause (I), the Corporation shall ensure that--

`(bb) sufficient actuarial data can be obtained.

`(G) ADMINISTRATION- In providing a policy of whole farm revenue insurance to an insured producer under this paragraph, the Corporation shall--

`(i) offer the policy through reinsurance agreements with private insurance companies;

`(ii) ensure that the policy is actuarially sound;

`(iii) require the insured producer to pay premiums and administrative fees for the policy in accordance with this section; and

`(iv) pay a portion of the premium for the policy in an amount that does not exceed the amount authorized under subsection (e), except that the portion of premium paid for livestock shall be determined by the Corporation.

`(H) REINSURANCE YEARS- This paragraph shall apply to each of the 2001 through 2004 reinsurance years.'.

SEC. 206. PRODUCT INNOVATION AND RATE COMPETITION PILOT PROGRAM.

Section 508(m) of the Federal Crop Insurance Act (7 U.S.C. 1508(m)) (as amended by section 205) is amended by adding at the end the following:

`(5) PRODUCT INNOVATION AND RATE COMPETITION PILOT PROGRAM-

`(A) PURPOSE- The purpose of the pilot program established under this paragraph is to determine what incentives are necessary to encourage approved insurance providers to--

`(i) develop and offer innovative risk management products to producers; and

`(ii) competitively rate premiums for the risk management products.

`(B) DEFINITIONS- In this paragraph:

`(i) INITIATING APPROVED INSURANCE PROVIDER- The term `initiating approved insurance provider' means an insurance provider that has--

`(I) been approved by the Corporation to deliver plans of insurance under this title; and

`(II) researched and developed a pilot product that has been proposed to, and approved by, the Board.

`(ii) PILOT PRODUCT- The term `pilot product' means a risk management product that has been researched and developed by an approved insurance provider and approved by the Board for--

`(I) loss of yield or revenue insurance coverage for 1 or more commodities (including commodities that are not insurable under this title as of the date of enactment of this paragraph, but excluding livestock);

`(II) rates of premium for the risk management product; and

`(III) associated underwriting systems for the risk management product.

`(C) APPROVED INSURANCE PROVIDERS-

`(i) IN GENERAL- Subject to clause (ii), the Corporation shall establish a pilot program under which only an insurance provider that has been approved by the Corporation to deliver plans of insurance under this title and the Standard Reinsurance Agreement may propose to the Board--

`(I) a pilot product;

`(II) rates of premium for the pilot product; and

`(III) associated underwriting systems for the pilot product.

`(ii) LACK OF PARTICIPATION BY PROVIDERS-

`(I) IN GENERAL- If (for any reinsurance year beginning 1 year or more after the date on which the Secretary promulgates rules to carry out this paragraph) at least 3 approved insurance providers have not obtained approval for a pilot product, the Corporation may approve any insurance provider that desires to participate in

`(aa) is licensed by an appropriate State insurance authority; and

`(bb) satisfies the financial standards required of an approved insurance provider.

`(II) CONSIDERED APPROVED- An insurance provider that the Corporation approves under subclause (I) shall be considered to be an approved insurance provider for the purposes of this paragraph.

`(iii) MARKETING IN PILOT AREA- An approved insurance provider marketing a pilot product under this paragraph shall not be required to market the pilot product in every county of a pilot area determined under subparagraph (D).

`(D) PILOT AREA-

`(i) DETERMINATION BY INITIATING APPROVED INSURANCE PROVIDER- Subject to clauses (ii) and (iii), an initiating approved insurance provider marketing a pilot product shall determine the size and location of a pilot area.

`(ii) LIMITATION- Subject to clause (iii), the size of the area in which the pilot program established under this paragraph is conducted shall not exceed--

`(I) in the case of the initial year of the pilot program, 10 counties in each of 3 States; and

`(II) in the case of each subsequent year of the pilot program, 20 counties in each of 6 States.

`(iii) ADJUSTMENTS- The Board may increase the size of the pilot area to the extent that the Board determines that a larger pilot area is necessary to validate the results of the pilot program.

`(E) RELATIONSHIP TO TITLE-

`(i) IN GENERAL- Each requirement of this title shall apply to a pilot product under this paragraph only to the extent that the requirement does not conflict with the requirements and purposes of this paragraph, as determined by the Corporation.

`(ii) INAPPLICABLE REQUIREMENTS- Requirements of this title that shall not apply to a pilot product include the requirements--

`(I) concerning actuarial soundness;

`(II) concerning levels of coverage;

`(III) concerning rates of premium;

`(IV) that the price level for coverage for each insured commodity must equal the expected market price for the commodity as established by the Board; and

`(V) that an approved insurance provider shall provide coverage of the pilot product throughout a State for all commodities if the approved insurance provider elects to provide any coverage in the State.

`(F) REVIEW BY THE BOARD- A proposal that applies to the type of insurance coverage, rates of premium for the pilot product, or associated underwriting systems for the pilot product that are submitted to the Board shall be reviewed by the Board.

`(G) SUBMISSIONS BY PROVIDERS- In accordance with standards established under subparagraph (I), an initiating approved insurance provider shall include in a proposal to the Board for a pilot product information on all issues described in subclauses (I) through (VII) of subparagraph (H)(i).

`(H) STANDARDS-

`(i) IN GENERAL- The Board shall approve a proposed pilot product for subsidy and reinsurance as provided in this paragraph if the Board finds that the proposal of the initiating approved insurance provider has adequately ensured that--

`(I) the interests of producers of commodities are adequately protected by the pilot product;

`(II) premiums charged to producers are actuarially appropriate;

`(III) the associated underwriting system of the proposed pilot product is appropriate and adequate;

`(IV) the proposed pilot product is reinsured under this title or through private reinsurance or is self-insured;

`(V) the size and 1 or more locations of the pilot area are adequate;

`(VI) plans for quality assurance, auditing, and regulatory compliance are consistent with standard regulatory procedures of State departments of insurance and financial auditing procedures of publicly traded companies; and

`(VII) insurance protection against the risk covered by the proposed pilot product is not generally available from private plans of insurance that are not covered by this title.

`(ii) RATES OF PREMIUM- A proposed rate of premium (including the part of premium paid by the Corporation) shall be considered adequate if the rate is sufficient to cover projected losses and expenses of the approved insurance provider, taking into consideration expected loss payments,

`(iii) PROPOSED UNDERWRITING PLANS- A proposed underwriting plan for a pilot product may be on a class or individual farm basis, and shall at a minimum specify factors such as yield history for the farm or region, soils and resource quality for the farm, and farm production practices.

`(iv) REINSURANCE-

`(I) FEDERAL REINSURANCE- Subject to subclause (III) and notwithstanding any other provision of this title, the Corporation shall, to the maximum extent practicable, make reinsurance available to an approved insurance provider under this paragraph.

`(II) PRIVATE OR FEDERAL REINSURANCE- An approved insurance provider may--

`(bb) obtain reinsurance for the pilot product under this title; or

`(cc) self-insure the pilot product.

`(III) ASSIGNMENT TO COMMERCIAL FUND- A contract for pilot products that receives reinsurance under this title shall be assigned to the commercial fund for proportional reinsurance as provided in the Standard Reinsurance Agreement.

`(IV) ACTUARIALLY APPROPRIATE- The Board shall prescribe standards for rating premiums that are actuarially appropriate considering the risk inherent in a pilot product.

`(I) STANDARDS FOR SUBMISSION AND REVIEW-

`(i) REGULATIONS BY CORPORATION- The Corporation shall promulgate regulations that establish standards for the submission and Board review of proposed pilot products submitted to the Board under this paragraph regarding the issues described in subclauses (I) through (VII) of subparagraph (H)(i).

`(ii) DOCUMENTATION BY PROVIDERS- The standards shall, at a minimum, specify what information and documentation shall be required of an initiating approved insurance provider regarding the issues described in subclauses (I) through (VII) of subparagraph (H)(i).

`(iii) PROCEDURE- The standards established by the Corporation shall also include procedures to carry out the following requirements:

`(I) PRESENTATION- The Board shall provide an applicant the opportunity to present the proposed pilot product to the Board in person.

`(II) NOTIFICATION-

`(bb) NOTICE OF DISAPPROVAL- Not later than 15 days prior to disapproving a proposed pilot product submitted by an applicant, the Board shall provide the applicant with notification of intent to disapprove the proposed pilot product.

`(cc) RIGHT TO MODIFY- An applicant that receives a notice of intent to disapprove the proposed pilot product may modify the proposed pilot product of the applicant.

`(dd) ORIGINAL APPLICATION- For purposes of this subclause, any modification shall be considered to be an original proposed pilot product.

`(ee) NOTICE OF INTENT TO MODIFY- An applicant shall provide to the Board notice of intent to modify the proposed pilot product within 5 business days after receiving the notification of intent to disapprove the proposed pilot product.

`(ff) TIMING- In establishing standards under this subclause, the Board shall prescribe a time deadline for the submission of proposed pilot products that approved insurance providers expect to market during the next reinsurance year.

`(J) CONFIDENTIALITY-

`(i) SUBMITTED PROPOSED PILOT PRODUCTS- Subject to clause (ii), a proposed pilot product submitted to the Board under this paragraph shall be considered to be confidential commercial or financial information for purposes of section 552(b)(4) of title 5, United States Code.

`(ii) APPROVED PROPOSED PILOT PRODUCTS- Subject to clause (iii), a general summary of the content of the pilot

`(I) the identity of the provider;

`(II) the coverage; and

`(III) the pilot area.

`(iii) REGULATIONS-

`(I) IN GENERAL- The Corporation shall by regulation prescribe the standard for confidentiality and the type of information contained in a proposed pilot product that shall not be available to other approved insurance providers.

`(II) STANDARD OF CONFIDENTIALITY- If information concerning a pilot product of an approved insurance provider satisfies the standard for privileged or confidential information pertaining to trade secrets and commercial or financial information under section 552(b)(4) of title 5, United States Code, the information shall not be released to the public.

`(K) MARKETING OF PILOT PRODUCTS-

`(i) IN GENERAL- On approval of a pilot product by the Board, the pilot product may be marketed to producers of commodities at actuarially appropriate rates.

`(ii) DELIVERY BY OTHER APPROVED PROVIDERS-

`(I) IN GENERAL- An approved insurance provider that desires to market a pilot product of an initiating approved insurance provider shall pay a fee for the right to market the pilot product if a fee is required by the initiating approved insurance provider.

`(II) TERMS OF FEE- The initiating approved insurance provider may determine the amount of the fee to be charged to, and all other terms involving payment of the fee by, the other approved insurance provider.

`(L) PAYMENT OF PART OF PREMIUM-

`(i) DEFINITION OF GROSS PREMIUM- In this subparagraph, the term `gross premium' means an amount, as determined by an approved insurance provider, of premium sufficient to cover projected indemnities and expenses of the approved insurance provider, taking into consideration expected loss payments, expenses, capital allocations, and other expense factors normally taken into account in insurance rating.

`(ii) PERCENTAGE OF GROSS PREMIUM PAID BY CORPORATION- Subject to clause (iii), the Corporation shall pay a part of the gross premium for each eligible contract for a pilot product that is equal to--

`(I) 63.86 percent of the gross premium for coverage equal to 50 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(II) 56.69 percent of the gross premium for coverage equal to 55 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(III) 50.03 percent of the gross premium for coverage equal to 60 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(IV) 53.19 percent of the gross premium for coverage equal to 65 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(V) 45.28 percent of the gross premium for coverage equal to 70 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(VI) 38.55 percent of the gross premium for coverage equal to 75 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage;

`(VII) 33.61 percent of the gross premium for coverage equal to 80 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage; and

`(VIII) 30.09 percent of the gross premium for coverage equal to 85 percent of the recorded or appraised average yield indemnified at 100 percent or less of the expected market price, or an equivalent coverage.

`(iii) MAXIMUM PERCENTAGE OF GROSS PREMIUM- The part of the gross premium that the Corporation may pay for a pilot product shall not exceed--

`(I) in the case of coverage below 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, but greater than 50 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount determined under subsection (e)(2)(B); or

`(II) in the case of 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, on an individual or area basis, the amount determined under subsection (e)(2)(C).

`(iv) NOTICE- The Corporation shall provide the insured producer with notice concerning the amount of the part of the premium paid under this subparagraph.

`(M) COMPLIANCE AND REGULATION-

`(i) REGULATION OF FRAUD AND ABUSE- In light of the continually changing nature of agricultural risk, the Corporation shall simplify, to the maximum extent practicable, the administration and regulation of the pilot program established under this paragraph, with an emphasis on--

`(I) the regulation of fraud and abuse; and

`(II) the compliance of each approved insurance provider in marketing pilot products.

`(ii) COSTS VERSUS BENEFITS- The Corporation shall consider and document the likely costs and benefits of a compliance or other regulatory requirement under this paragraph prior to imposing the requirement on an approved insurance provider or producer.

`(iii) DUPLICATE COVERAGE NOT ALLOWED- A producer shall not be eligible to purchase a contract for a pilot product under this paragraph if the producer (in the same reinsurance year for the same commodity)--

`(I) has obtained coverage through a plan of insurance authorized under subsections (b) or (c); or

`(II) is eligible for noninsured crop disaster assistance under section 196 of the Agricultural Market Transition Act (7 U.S.C. 7333).

`(N) LIMITATION ON FUNDING- The Corporation and the Board shall not use any appropriated funds, any funds from the insurance fund established under section 516, or any funds from the Commodity Credit Corporation, for the development of pilot products under this paragraph.

`(O) PREMIUM LIMITATION-

`(i) DEFINITION OF PREMIUM- In this subparagraph, the term `premium' means the aggregate amount of gross premium (as defined in subparagraph (L)(i)) paid for all pilot products that is necessary to cover projected indemnities, as determined by the Corporation.

`(ii) LIMITATION- The total amount of premium shall not exceed--

`(I) $10,000,000 for the 2001 reinsurance year;

`(II) $15,000,000 for the 2002 reinsurance year;

`(III) $25,000,000 for the 2003 reinsurance year; and

`(IV) $40,000,000 for the 2004 reinsurance year.

`(P) REINSURANCE YEARS- This paragraph shall apply to each of the 2001 through 2004 reinsurance years.'.

SEC. 207. LIMITATION ON DOUBLE INSURANCE.

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

(1) by striking `If a producer' and inserting the following:

`(1) IN GENERAL- If a producer'; and

(2) by adding at the end the following:

`(2) LIMITATION ON DOUBLE INSURANCE- The Corporation may offer plans of insurance or reinsurance for only 1 agricultural commodity produced 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 specific acreage has historically been double-cropped.'.

SEC. 301. REGULATIONS.

(a) IN GENERAL- Except as provided in subsection (b), not later than 60 days after the date of enactment of this Act, the Secretary of Agriculture shall promulgate regulations to carry out this Act and the amendments made by this Act.

(b) EXCEPTIONS- Not later than 180 days after the date of enactment of this Act, the Secretary shall promulgate regulations to carry out--

(1) paragraphs (7) and (8) of section 102(b); and

(2) paragraphs (4) and (5) of section 508(m) of the Federal Crop Insurance Act (7 U.S.C. 1508(m)) (as amended by sections 205 and 206).