S 529 IS

To amend the Federal Crop Insurance Act to improve crop insurance coverage, to make structural changes to the Federal Crop Insurance Corporation and the Risk Management Agency, and for other purposes.

To amend the Federal Crop Insurance Act to improve crop insurance coverage, to make structural changes to the Federal Crop Insurance Corporation and the Risk Management Agency, 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 for the 21st Century Act'.

(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. Payment of portion of premium by Corporation.

Sec. 102. Assigned yields.

Sec. 103. Multiyear disaster actual production history adjustment.

Sec. 104. Increasing coverage policy.

Sec. 105. Rating methodologies pilot program.

Sec. 106. Livestock insurance.

TITLE II--FEDERAL CROP INSURANCE CORPORATION AND RISK MANAGEMENT AGENCY

Sec. 201. Board of Directors of Corporation.

Sec. 202. Office of Risk Management.

Sec. 203. Office of Private Sector Partnership.

Sec. 204. Adequate coverage for agricultural commodities.

Sec. 205. Fees for plans of insurance.

Sec. 206. Flexible subsidy pilot program.

SEC. 101. PAYMENT OF PORTION OF PREMIUM BY CORPORATION.

(a) EXPECTED MARKET PRICE- 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;

`(iii) in the case of revenue and other similar plans of insurance, shall be the actual market price of the agricultural commodity, as determined by the Corporation; or

`(iv) 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) PREMIUM AMOUNTS- Section 508(d)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(d)(2)) is amended by striking subparagraph (C) and inserting the following:

`(C) In the case of additional coverage at greater than or equal to 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, but less than 75 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount of the premium shall--

`(i) be sufficient to cover anticipated losses and a reasonable reserve; and

`(ii) include an amount for operating and administrative expenses, as determined by the Corporation, on an industry-wide basis as a percentage of the amount of the premium used to define loss ratio.

`(D) In the case of additional coverage equal to or greater than 75 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, the amount of the premium shall--

`(i) be sufficient to cover anticipated losses and a reasonable reserve; and

`(ii) include an amount for operating and administrative expenses, as determined by the Corporation, on an industry-wide basis as a percentage of the amount of the premium used to define loss ratio.'.

(c) PAYMENT OF PORTION OF PREMIUM BY CORPORATION- Section 508(e) of the Federal Crop Insurance Act (7 U.S.C. 1508(e)) is amended--

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

`(1) IN GENERAL-

`(A) MANDATORY PAYMENTS- For the purpose of encouraging the broadest possible participation of producers in the crop insurance plans of insurance authorized to be insured or reinsured under subsections (b) and (c), the Corporation shall pay a part of the premium in the amounts determined under this subsection.

`(B) DISCRETIONARY PAYMENTS- In the case of a plan of insurance approved by the Corporation under subsections (a)(7) and (h), the Corporation may pay a part of the premium in the amounts not to exceed the amounts determined under this subsection.'; and

(2) in paragraph (2), by striking subparagraphs (B) and (C) and inserting the following:

`(B) In the case of additional coverage less 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) 45 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 coverage at greater than or equal to 65 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price, or an equivalent coverage, but less than 75 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).

`(D) In the case of coverage equal to or greater than 75 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) 55 percent of the amount of the premium established for coverage at 75 percent of the recorded or appraised average yield indemnified at 100 percent of the expected market price under subsection (d)(2)(D)(i); and

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

(d) CONFORMING AMENDMENT- Section 508(h)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(2)) is amended by striking the second sentence.

SEC. 102. 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. 103. MULTIYEAR DISASTER ACTUAL PRODUCTION HISTORY ADJUSTMENT.

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

`(4) TRANSITIONAL ADJUSTMENT FOR DISASTERS-

`(A) DEFINITION OF A PRODUCER THAT HAS SUFFERED A MULTIYEAR DISASTER- In this paragraph, the term `a producer that has suffered a multiyear disaster' means a producer that has suffered a natural disaster during at least 3 of the immediately preceding 5 crop years that resulted in a cumulative reduction of at least 25 percent in the actual production history of the crop of an agricultural commodity.

`(B) ELIMINATION OF CERTAIN YEARS OF PRODUCTION HISTORY- Effective beginning with the 2000 crop year, for the purpose of calculating the actual production history for a crop of an agricultural commodity, a producer that has suffered a multiyear disaster with respect to the crop may exclude 1 year of production history for each 5 years included in the actual production history calculation of the crop for which the producer purchased crop insurance.

`(C) CORPORATION'S SHARE OF CHANGED COSTS- In the case of an exclusion under subparagraph (B), in addition to any other authority to pay any portion of premium, the Corporation shall pay--

`(i) the portion of the premium that represents the increase in premium associated with the exclusion;

`(ii) all additional indemnities associated with the exclusion; 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 an adjustment in actual production history under this paragraph.

`(D) INCREASE IN ACTUAL PRODUCTION HISTORY AFTER EXCLUSIONS- In the case of a producer that has received an exclusion under subparagraph (B), the Corporation shall not limit the increase of the actual production history based on the producer's actual production of the crop of an agricultural commodity in succeeding crop years until the actual production history for the producer reaches the level for the crop year immediately preceding the first year of the multiyear disaster.

`(E) TERMINATION OF EXCLUSION AUTHORITY- The authority to apply this paragraph to a producer shall terminate with respect to the first crop year in which crop insurance is available to the producer that adequately insures against natural disasters that occur in multiple crop years, as determined by the Corporation.'.

SEC. 104. INCREASING COVERAGE POLICY.

Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)) is amended by striking paragraph (6) and inserting the following:

`(6) INCREASING COVERAGE POLICY- In the case of a plan of insurance that includes coverage for that percentage of coverage that is not covered under other crop insurance plans offered under this title, the Corporation may pay a portion of the premium of the policy in an amount not to exceed the sum of--

`(A) the cost of administrative and operating expenses, as determined by Corporation; and

`(B) the amount authorized under subsection (e)(2)(D)(i).'.

SEC. 105. RATING METHODOLOGIES PILOT PROGRAM.

(a) IN GENERAL- Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h)) is amended by striking paragraph (8) and inserting the following:

`(8) RATING METHODOLOGIES PILOT PROGRAM- Not later than September 30, 2000, the Office of Risk Management shall--

`(A) review the methodologies that are used to rate plans of insurance under this title; and

`(B) enter into a contract with a person in the private sector to develop new methodologies for rating plans of insurance under this title that take into account the lower risk pool of--

`(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) CONFORMING AMENDMENT- Section 507(c) of the Federal Crop Insurance Act (7 U.S.C. 1507(c)) is amended in the last sentence by striking `Nothing' and inserting `Except as provided in section 508(h)(8), nothing'.

SEC. 106. LIVESTOCK INSURANCE.

Section 518 of the Federal Crop Insurance Act (7 U.S.C. 1518) is amended by striking `livestock and'.

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) 2 members who are active agricultural producers with or without crop insurance;

`(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.'.

SEC. 202. OFFICE OF RISK MANAGEMENT.

Section 226A of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6933) is amended--

(1) in subsection (a), 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'; and

(2) in subsection (b), 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.

(a) IN GENERAL- 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; and

`(4) 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 employees who have commercial reinsurance and actuarial experience.'.

(b) 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.'; and

(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; and'.

SEC. 204. ADEQUATE COVERAGE FOR AGRICULTURAL COMMODITIES.

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) ADEQUATE COVERAGE FOR AGRICULTURAL COMMODITIES-

`(A) REVIEW- The Board shall review the plans of insurance that are offered by approved insurance providers under this Act to determine if each agricultural commodity (including each new or speciality crop) is adequately served by the plans.

`(B) RECOMMENDATIONS- If the Board determines that an agricultural commodity (including a new or specialty crop) is not adequately served by the plans, the Board shall recommend to the Office of Risk Management that the Office--

`(i) develop or (through the Corporation) contract to develop plans of insurance for the agricultural commodity; and

`(ii) provide the plans to approved insurance providers, to be offered for sale to producers.'.

SEC. 205. FEES FOR PLANS OF INSURANCE.

(a) IN GENERAL- 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 EXISTING PLANS OF INSURANCE-

`(i) IN GENERAL- Effective beginning with the 2000 reinsurance year, if an approved insurance provider elects to sell a plan of insurance that was developed by another approved insurance provider and the plan of insurance was approved by the Board before January 1, 1999, 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- The amount of the fee that is payable by an approved insurance provider for a plan of insurance under clause (i) shall be--

`(I) for each of the first 5 crop years that the plan is sold, $2.00 for each policy under the plan that is sold by the approved insurance provider;

`(II) for each of the next 3 crop years that the plan is sold, $1.00 for each policy under the plan that is sold by the approved insurance provider; and

`(III) for each crop year thereafter that the plan is sold, 50 cents for each policy under the plan that is sold by the approved insurance provider.

`(C) FEES FOR NEW PLANS OF INSURANCE-

`(i) IN GENERAL- Effective beginning with the 2000 reinsurance year, if an approved insurance provider elects to sell a plan of insurance that was developed by another approved insurance provider, the plan of insurance was approved by the Board on or after January 1, 1999, and the plan of insurance was not available at the time the plan of insurance was approved by the Board, 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.

`(D) 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 subparagraphs (B) and (C); and

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

(b) FUNDING- Section 516 of the Federal Crop Insurance Act (7 U.S.C. 1516) (as amended by section 203(b)(2)) is amended--

(1) in subsection (b)(1), by adding at the end the following:

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

(2) in subsection (c)(1), by inserting `and fees' after `premium income'.

SEC. 206. 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.'.