General Administrative Regulations, Subpart U; and Catastrophic Risk Protection Endorsement; Regulations for the 1999 and Subsequent Reinsurance Years

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 400 and 402

RIN 0563-AB68

General Administrative Regulations, Subpart U; and Catastrophic

Risk Protection Endorsement; Regulations for the 1999 and Subsequent

Reinsurance Years

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the

General Administrative Regulations, subpart U--Ineligibility for

Programs Under the Federal Crop Insurance Act (7 CFR part 400, subpart

U) and the Catastrophic Risk Protection Endorsement (7 CFR part 402) to

implement the statutory mandates of the Agricultural Research,

Extension, and Education Reform Act of 1998 (1998 Research Act) and the

Agriculture, Rural Development, Food and Drug Administration and

Related Agencies Appropriations Act, 1999 (1999 Appropriations Act)

enacted on October 19, 1998.

EFFECTIVE DATE: This rule is effective September 27, 1999.

FOR FURTHER INFORMATION CONTACT: Louise Narber, Insurance Management

Specialist, Research and Development, Product Development Division,

Federal Crop Insurance Corporation, United States Department of

Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone (816)

926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant for the purposes of

Executive Order 12866 and, therefore, has been reviewed by the Office

of Management and Budget (OMB).

Paperwork Reduction Act of 1995

Under the provisions of the Paperwork Reduction Act of 1995 (44

U.S.C. chapter 35), the collections of information for this rule have

been previously approved by OMB under control number 0563-0053 through

April 30, 2001. This rule was amended to implement the statutory

mandates of the 1998 Research Act which changed the administrative fee

for CAT coverage from $50 per crop per county, not to exceed $200 per

county, or $600 for all counties in which the producer elected to

obtain limited coverage, to $60 per crop per county. The amendments set

forth in this rule do not revise the content or alter the frequency of

reporting for any of the forms or information collections cleared under

the above-referenced docket.

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 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 12612

It has been determined under section 6(a) of Executive Order 12612,

Federalism, that this rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment. The

provisions contained in this rule will not have a substantial direct

effect on States or their political subdivisions or on the distribution

of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

This regulation will not have a significant economic impact on a

substantial number of small entities. The regulation does not require

any more action on the part of the small entities than is required on

the part of large entities. Therefore, this action is determined to be

exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C.

605) and no Regulatory Flexibility Analysis was prepared.

[[Page 40739]]

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372 which require intergovernmental consultation with State and local

officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115, June 24, 1983.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order

12988 on civil justice reform. The provisions of this rule will not

have a retroactive effect. The provisions of this rule will preempt

State and local laws to the extent such State and local laws are

inconsistent herewith. The administrative appeal provisions published

at 7 CFR part 11 must be exhausted before any action for judicial

review of any determination made by FCIC may be brought.

Environmental Evaluation

This action is not expected to have a significant economic impact

on the quality of the human environment, health, and safety. Therefore,

neither an Environmental Assessment or an Environmental Impact

Statement is needed.

Background

This rule finalizes revisions to part 400, subpart U and part 402

mandated by the 1998 Research Act, enacted June 23, 1998, and the 1999

Appropriations Act enacted on October 19, 1998. On Thursday, July 30,

1998, FCIC published an interim rule in the Federal Register at 63 FR

40630-40632 to amend subpart U and the Catastrophic Risk Protection

Endorsement to implement the statutory mandates of the 1998 Research

Act, which requires the provisions be implemented for the 1999 and

subsequent reinsurance years. The 1999 Appropriations Act enacted after

the publication of the interim rule waives the administrative fee of 10

percent of the premium that was enacted in the 1998 Research Act for

the 1999 and subsequent reinsurance years. Changes in this rule, not

made effective by the interim rule, are not in effect until the

effective date of this rule.

Following publication of the interim rule, the public was afforded

60 days to submit written comments. A total of 8 comments was received

from an insurance company and an insurance service organization. The

comments received and FCIC's responses are as follows:

Comment: An insurance service organization stated that private

carriers are expected to complete forms, issue policies, adjust losses,

audit policies, and now reprogram the computer systems to handle the

change in the Basic Provisions procedures and perform the billing

function for CAT policies in exchange for minimal reimbursement. The

insurance service organization suggested that FCIC, through the

Standard Reinsurance Agreement, allow companies to retain 50 percent of

the fees, including flat fees or percentages based on premium

computations.

Response: The 1998 Research Act specifies all administrative fees

shall be deposited in the crop insurance fund to be available for the

programs and activities of FCIC and specifically prohibits use of this

fund to compensate insurance providers or agents for the delivery of

services. Therefore, no change has been made.

Comment: An insurance service organization suggested the

definitions for ``additional coverage,'' ``administrative fee,''

``catastrophic risk protection,'' ``limited coverage,'' and ``limited

resource farmer'' be deleted from the Catastrophic Risk Protection

Endorsement since they are being added to the Basic Provisions. The

insurance service organization suggested if they were not eliminated

they should be revised to match those definitions in the Basic

Provisions, unless additional information is needed in the Catastrophic

Risk Protection Endorsement.

Response: FCIC has deleted the definitions for ``additional

coverage,'' ``administrative fee,'' ``catastrophic risk protection,''

``limited coverage,'' and ``limited resource farmer'' from the

Catastrophic Risk Protection Endorsement and moved them to the Basic

Provisions.

Comment: An insurance company and an insurance service organization

stated the regulation references 10 percent of the premium subsidy and

the law refers to this as 10 percent of the imputed premium. They asked

if there was a reason for the difference in the wording. They stated

the industry is now accustomed to the idea of ``imputed premium.''

Response: The 1998 Research Act refers to 10 percent of the

premium. Section 6(b)(1) of the Catastrophic Risk Protection

Endorsement refers to 10 percent of the premium subsidy because all of

the CAT premium is subsidized by the Federal Government. However, this

provision has been revised to remove all reference to 10 percent of the

premium as required by the 1999 Appropriations Act.

Comment: An insurance company and an insurance service organization

stated it was their understanding that for nursery, the billing date is

at the beginning of the coverage period and this presumably would be

the fee due date. The nursery program requires periodic inventory

updates, thus the premium could vary depending on the inventory. They

asked if the fee continually adjusts through the year depending on

inventory and the corresponding imputed premium when the fee is 10

percent of the imputed premium.

Response: For the old nursery policy, the administrative fees will

be paid with the premium. If there are more than one premium due dates,

the administrative fee must be paid by the final due date. Since the

provision regarding the administrative fee of 10 percent of the premium

has been removed, inventory adjustments are no longer an issue.

Comment: An insurance company and an insurance service organization

stated the pecan program is a two year coverage module. They asked

whether a CAT pecan policy that has been in effect for one year under

the previous administrative fee structure would keep that fee or if the

new fees specified in section 7(b)(1) of the Catastrophic Risk

Protection Endorsement apply for the second year.

Response: Since the pecan policy is a two year coverage module and

the first year's sales closing date was prior to the effective date of

this regulation, the administrative fee that applied for the 1998 crop

year will also apply for the 1999 crop year.

In addition to these changes, the administrative fee for

catastrophic coverage has been changed due to the 1999 Appropriations

Act. The administrative fee for catastrophic coverage for each crop in

the county has been changed from $10 plus the greater of either $50 or

10 percent of the premium subsidy to $60 per crop per county. Also, due

to the Appropriations Act, paragraph 9(b) of the Catastrophic Risk

Protection Endorsement has been revised to state that producers

eligible for CAT coverage are also eligible for emergency loans.

List of Subjects in 7 CFR Parts 400 and 402

Administrative practice and procedure, Catastrophic risk protection

endorsement, Claims, Crop insurance, Fraud, Insurance provisions,

Reporting and recordkeeping requirements.

[[Page 40740]]

Final Rule

Accordingly, as set forth in the preamble, the interim rule

amending 7 CFR parts 400 and 402, published on July 30, 1998 at 63 FR

40630, is adopted as final with the following changes:

PART 402--CATASTROPHIC RISK PROTECTION ENDORSEMENT; REGULATIONS FOR

THE 1999 AND SUBSEQUENT REINSURANCE YEARS

1. The authority citation for 7 CFR part 402 continues to read as

follows:

Authority: 7 U.S.C. 1506(1), 1506(p).

Sec. 402.4 [Amended]

2. Amend Sec. 402.4 as follows:

a. Remove the definitions of ``additional coverage,''

``administrative fee,'' ``catastrophic risk protection,'' ``limited

coverage,'' and ``limited resource farmer'' in Section 1.

b. Revise Section 6 paragraph (b)(1).

c. Revise Section 9 paragraph (b). The revisions to Sec. 402.4 read

as follows:

Sec. 402.4 Catastrophic Risk Protection Endorsement Provisions.

6. Annual Premium and Administrative Fees.

* * * * *

(b) * * *

(1) The administrative fee owed for each crop in the county is $60.

* * * * *

9. Claim for Indemnity.

* * * * *

(b) If you are eligible to receive an indemnity under this

endorsement and benefits compensating you for the same loss under any

other USDA program, you must elect the program from which you wish to

receive benefits. Only one payment or program benefit is allowed.

However, if other USDA program benefits are not available until after

you filed a claim for indemnity, you may refund the total amount of the

indemnity and receive the other program benefit. Notwithstanding the

first sentence of this subsection, farm ownership, operating, and

emergency loans may be obtained from the USDA in addition to an

indemnity under this endorsement.

* * * * *

Signed in Washington, DC, on July 20, 1999.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 99-19014 Filed 7-27-99; 8:45 am]

BILLING CODE 3410-08-P