STANDARD REINSURANCE AGREEMENT
(July 1, 1997)
between the
FEDERAL CROP INSURANCE CORPORATION
and the
(Insurance Company Name)
(City and State)
This Agreement establishes the terms and conditions under which FCIC will
provide subsidy and reinsurance on eligible crop insurance contracts sold or
reinsured by the above named insurance company. This Agreement is authorized by
the Act and regulations promulgated thereunder codified in 7 C.F.R. chapter IV.
Such regulations are incorporated into this Agreement by reference. The
provisions of this Agreement that are inconsistent with provisions of State or
local law or regulation will supersede such law or regulation to the extent of
the inconsistency. This is a cooperative financial assistance agreement between
FCIC and the Company to deliver eligible crop insurance under the authority of
the Act. For the purposes of this Agreement, use of the plural form of a word
includes the singular and use of the singular form of a word includes the plural
unless the context indicates otherwise. The headings in this Agreement are
descriptive only and have no legal effect on FCIC or the Company.
SECTION I. DEFINITIONS
"Act" means the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.).
------
"Actuarial data master file" means the hard copy and EDP compatible information
distributed by FCIC that contains premium rates, program dates, and related
information concerning the crop insurance program for a crop year.
"Additional coverage" means a plan of crop insurance providing a level of
coverage equal to or greater than 65 percent of the recorded or appraised
average yield indemnified at 100 percent of the projected market price, or a
comparable insurance plan as determined by FCIC.
"A&O subsidy" means the subsidy for the administrative and operating expenses
authorized by the Act and paid by FCIC on behalf of the producer to the Company.
"Administrative fee" means the processing fee the policyholder must pay in
accordance with the Act and 7 C.F.R. chapter IV.
"Agency" means the person or entity with a contract or agreement with the
Company or its MGA to sell and service eligible crop insurance contracts under
the Federal crop insurance program.
"Agent" means an individual licensed by the State in which the agent does
business under contract with a Company, its managing general agent, or any other
entity, to sell and service eligible crop insurance contracts.
"Agreement" means this Standard Reinsurance Agreement, all Appendices, all
referenced documents including Manual 13 and the Approved Manual 14.
"Annual Settlement" means the settlement of accounts between the Company and
FCIC for the reinsurance year, beginning with the February monthly transaction
cutoff date following the reinsurance year and continuing monthly thereafter as
necessary.
"Approved Manual 14" means the Guidelines and Expectations for the delivery of
the Federal Crop Insurance Program (Manual 14) as it exists 30 days prior to the
date on which the Plan of Operation must be submitted to FCIC with respect to
such reinsurance year.
"Billing date" means the date specified in the actuarial data master file as the
date by which policyholders are billed for premium due on eligible crop
insurance contracts.
"Board" means the FCIC Board of Directors.
"Book of business" means the aggregation of all eligible crop insurance
contracts in force between the Company and its policyholders that have a sales
closing date within the reinsurance year and are eligible to be reinsured under
this Agreement.
"Cancellation date" means the date by which the Company or policyholder must
notify the other that coverage under an eligible crop insurance contract issued
by the Company is canceled for a succeeding crop year. The day following this
date is considered as the date a continuous eligible crop insurance contract
carried over from the previous crop year is renewed for the subsequent crop
year.
"Carryover crop insurance contract" means eligible crop insurance contract that
has been in force for at least one crop year term and continues in force for
another crop year term after the cancellation date.
"Catastrophic risk protection (CAT)" means an eligible crop insurance contract
that is in accordance with section 508(b) of the Act.
"Cede" means to pass to FCIC all or part of the net book premium and associated
liability for ultimate net losses on eligible crop insurance contracts written
by a Company under this Agreement.
"Claims supervisor" means any person having immediate day-to-day supervisory
control (e.g., assigning and reviewing work of Company employees or exercising
appropriate management of contractors) over the activities of loss adjusters or
other persons who determine whether an indemnity will be paid and the amount.
"Code of Federal Regulations (C.F.R.)" means the code published annually in
accordance with the Federal Register Act (44 U.S.C. chapter 15) by the Office of
the Federal Register that contains each published Federal regulation of general
applicability and legal effect.
"Company" means the private insurance Company named on this Agreement.
"Company payment date" means the last business day of the month.
"Competing agency" means an agency selling or servicing any eligible crop
insurance contract in any county (including all counties adjoining such county)
in which another agency has sold or is in the process of selling any eligible
crop insurance contract.
"Contract change date" means the date specified in the crop insurance contract
by which FCIC must publish all changes to the crop insurance contract in order
to make such changes binding on the Federal Crop Insurance Corporation, the
Company, and the policyholder.
"Crop insurance contract" means an agreement (with the terms in effect as of the
contract change date) to insure the insurable interest of an eligible producer
in a single crop in a single county as provided by the application, the General,
or Common Crop Insurance Policy, the Crop Endorsements, the Basic Provisions,
the Crop Provisions, the Special Provisions, the Catastrophic Risk Protection
Endorsement, as applicable, the Actuarial Table, and any other instrument or
endorsement as approved by FCIC.
"Data Acceptance System (DAS)" means the EDP system that receives, and accepts
or rejects the Company submitted data upon which all payments to FCIC and the
Company are based.
"Electronic data processing (EDP)" means the electronic process by which
information is digitally transferred, used, and stored.
"Electronic fund transfer (EFT)" means the process by which funds are
electronically transferred between FCIC's account and the Company's account.
"Eligible crop insurance contract" means a crop insurance contract that is sold
and serviced consistent with the Act, 7 C.F.R. chapter IV, FCIC approved
regulations and procedure, at applicable rates, terms, and special conditions;
having a sales closing date within the reinsurance year; to an eligible
producer, covering a crop in an area approved by FCIC; and on forms approved in
writing by FCIC.
"Eligible producer" means a person who meets all the conditions for eligibility
specified in 7 C.F.R. chapter IV.
"Employer identification number (EIN)" means the identification number for an
individual, business entity, or a foreign entity obtained from the Internal
Revenue Service pursuant to section 6109 of the Internal Revenue Code of 1986.
"Federal Crop Insurance Corporation (FCIC)" means the wholly-owned government
Corporation within the United States Department of Agriculture authorized to
carry out all actions and programs authorized by the Act.
"FCIC payment date" means the first banking day following the 14th calendar day
after FCIC receives the monthly summary or annual settlement report and
supporting data from the Company upon which any payment is based.
"Group risk plan (GRP)" means crop insurance coverage based upon the average
yield realized by a group of producers as determined by FCIC.
"Insurable interest" means the portion of an insured crop a person has at risk
in the event of an insurable loss.
"Insurance Plan" means the type of insurance coverage provided on a crop. For
example, a crop may be insured under the GRP plan, a revenue insurance plan, or
a guaranteed-yield plan. Differences in levels of coverage do not create
different plans.
"Limited coverage" means an insurance plan offering coverage that is equal to or
greater than 50 percent of the recorded or appraised average yield indemnified
at 100 percent of the projected market price but less than 65 percent of the
recorded or appraised average yield indemnified at 100 percent of the projected
market price, or a comparable insurance plan as determined by FCIC.
"Loss ratio" means the ratio calculated by dividing the ultimate net loss by the
net book premium, expressed as a percentage. For example, the ratio of $1
ultimate net loss to 50 cents net book premium would be expressed as 200
percent.
"Managing general agent (MGA)" is an entity that meets the definition of
managing general agency under the laws of the State in which it is incorporated,
or in the absence of such State law or regulation, meets the definition of a
managing general agency in the National Association of Insurance Commissioners'
Model Act.
"Manual 13" means the Data Acceptance System Handbook for the reinsurance year
for which this Agreement is effective.
"Net book premium" means the total premium calculated for all eligible crop
insurance contracts, less A&O subsidy, cancellations, and adjustments.
"Person" means any individual or legal entity possessing the capacity to
contract.
"Plan of Operations" means the information and documents required from the
Company under Appendix 2 of this Agreement.
"Policyholder" means an eligible producer who has been issued one or more
eligible crop insurance contracts.
"Producer premium" means that portion of the FCIC approved insurance premium for
the risk of loss that the policyholder must pay.
"Records" means original documents, including original signed documents that may
have been recorded, copied, or reproduced in the original form by any
photographic, photostatic, microfilm, microcard, miniature photographic, optical
disk, electronic imaging, electronic data processing, or electronically
transmitted facsimile technology: Provided, That any signature contained on the
original is preserved.
"Reinsurance account" means an account maintained by FCIC by which a portion of
the Company's underwriting gains may be held for future distribution.
"Reinsurance year" means the period from July 1 of any year through June 30 of
the following year and identified by reference to the year containing June. All
eligible crop insurance contracts with sales closing dates within the
reinsurance year are subject to the terms of the Agreement applicable to that
reinsurance year.
"Retained" as applied to ultimate net losses, net book premium, or book of
business, means the remaining liability for ultimate net losses and the right to
associated net book premiums after all reinsurance cessions to FCIC under this
Agreement.
"Revenue insurance" means plans of insurance providing protection against loss
of income which are designated as such by FCIC.
"Risk subsidy" means that portion of the FCIC approved insurance premium for the
risk of loss paid by FCIC on behalf of the policyholders.
"Sales closing date" means the date established by FCIC as the last date on
which a producer may apply for an eligible crop insurance contract on a crop in
a specific county.
"Sales supervisor" means any person having immediate or day-to-day supervisory
control (e.g., assigning and reviewing work of Company employees or exercising
appropriate management of contractors) over the activities of sales agents,
competing agencies or sales agency employees on behalf of the Company.
"Satisfactory performance record" means a record of performance that
demonstrates substantial conformity with all requirements of this Agreement. The
Company or its MGA, if applicable, shall be deemed to have a satisfactory
performance record if any deficiency was caused by circumstances beyond its
control and where, as soon as it was made aware of the deficiency, it took
timely and appropriate corrective action. Material misconduct on the part of any
employee, agent, loss adjuster, or any other contractor will not be considered
as a deficiency beyond its control. Nothing contained herein affects the
Company's liability under any other provision of this Agreement. Continued
failure to meet requirements of the Agreement is a significant factor considered
in determining satisfactory performance.
"Social security number" ("SSN") means the identification number provided for an
individual by the Social Security Administration, and may be the tax
identification number (TIN).
"Transaction cutoff date" for weekly data reporting is 6 p.m. central time on
Saturday of each week. The transaction cutoff date for the monthly summary
reports is 6 p.m. central time on the Saturday occurring within the first full
week (i.e., Sunday through Saturday) of the month.
"Ultimate net loss" means the amount paid by the Company under any eligible crop
insurance contract reinsured under this Agreement in settlement of any claim and
in satisfaction of any judgment or arbitration award rendered on account of such
claim, less any recovery or salvage by the Company. Ultimate net loss may
include interest and policyholder's court costs related to the eligible crop
insurance contract provisions or procedures that are contained in a final
judgment against the Company by a court of competent jurisdiction if FCIC
determines: (1) that such interest or court costs resulted from the Company's
substantial compliance with FCIC procedures or instructions in the handling of
the claim or in the servicing of the policyholder or that the actions of the
Company were in accordance with accepted loss adjustment procedures; and (2)
that the award of such interest or court costs did not involve negligence or
culpability on the part of the Company. Ultimate net loss may also include
interest or policyholder's court costs related to the crop insurance provisions
or procedures that are included in the settlement of any claim if FCIC, in
addition to the determinations included above, is advised of the terms of and
the basis for the settlement and determines that the settlement should be
approved. Under no circumstance are any punitive or consequential damages
included in the calculation of ultimate net loss.
"Underwriting" means the acceptance or rejection of individual insurance risk,
and determining the amounts and the terms by which the Company will accept the
risk for an eligible crop insurance contract.
"Underwriting gain" means the amount by which the Company's share of retained
net book premium exceeds its retained ultimate net losses.
"Underwriting loss" means the amount by which the Company's share of retained
ultimate net losses exceeds its retained net book premium.
SECTION II. REINSURANCE
A. General Terms
1. Only eligible crop insurance contracts will be reinsured and subsidized
under this Agreement.
2. Except as specified below, the Company must offer all approved plans of
insurance for all approved crops in any State in which it writes an
eligible crop insurance contract and must accept and approve all
applications from all eligible producers. The Company may not cancel the
crop insurance contract held by any policyholder so long as the
policyholder remains an eligible producer and the Company continues to
write eligible crop insurance contracts within the State. The Company is
not required to offer such plans of insurance as may be approved by FCIC
under the authority of section 508(h) of the Act. However, if the Company
chooses to offer any such plan, it must offer the plan in all approved
states in which it writes an eligible crop insurance contract and it must
comply with all provisions of this paragraph as to such plan unless the
Board determines that a separate and complete reinsurance agreement will be
issued for the reinsurance of such plan.
3. In exchange for the reinsurance premiums provided by the Company pursuant
to this Agreement, FCIC will provide the Company with reinsurance pursuant
to the provisions of this Agreement.
4. All eligible crop insurance contracts reinsured and subsidized under this
Agreement must conform to the regulations published at 7 C.F.R., chapter IV
or as approved in writing by FCIC.
5. FCIC will not provide reinsurance, A&O subsidy, or risk subsidy for any
eligible or ineligible crop insurance contract that is sold or serviced in
violation of the terms of this Agreement, 7 C.F.R., chapter IV, FCIC
approved procedures or any written instructions of FCIC.
6. No portion of the net book premium or the A&O subsidy may be rebated in any
form to policyholders, except as authorized by the Act and approved in
writing by FCIC. Neither the Company nor its agents shall assess service
fees or additional charges on eligible crop insurance contracts reinsured
and subsidized under this Agreement except as authorized by the Act and
approved in writing by FCIC.
7. Only the amount of net book premium authorized by FCIC in the approved Plan
of Operations may be reinsured and subsidized under this Agreement.
Whenever the Company reports an amount of net book premium greater than
FCIC authorized as the maximum reinsurable net book premium, FCIC may, at
its sole discretion, cause the net underwriting gain or loss for all States
as defined in section II.D.3. payable to or by the Company to be reduced
according to the ratio of the excess net book premium to the total reported
net book premium. The excess will then be reinsured under this Agreement.
The Company agrees to pay FCIC an additional reinsurance premium equal to 5
percent of the excess net book premium whenever this provision applies.
8. To be eligible for an Agreement, or continue to hold an Agreement:
a. The Company must have adequate financial resources at the beginning of the
reinsurance year as required by 7 C.F.R. part 400, subpart L. If at any
time during the reinsurance year the Company no longer has adequate
financial resources, the Company must timely obtain such resources.
b. The Company, and any managing general agent that it appoints or proposes to
appoint must:
i. Have a satisfactory performance record;
ii. Have the necessary organization, experience, accounting and operational
controls, and technical skills to fulfill its obligations under the
Agreement, or the ability to obtain them;
iii. Have the necessary equipment to fulfill its obligations under the
Agreement, including, but not limited to, EDP resources and facilities or
the ability to obtain such equipment; and
iv. Perform under a written contract or agreement with each other.
B. Proportional Reinsurance
Within each State, the Company, in accordance with its Plan of Operations, may
designate eligible crop insurance contracts to a: (1) Assigned Risk Fund;
(2) Developmental Fund; or (3) Commercial Fund. 1. Assigned Risk Fund
a. The Company may designate eligible crop insurance contracts, including
those previously designated to a Developmental Fund, that have an aggregate
net book premium not greater than the maximum cession limits specified in
section II.B.1.d. to the Assigned Risk Fund for each State. The Company
must retain 20 percent of the net book premium and associated liability for
ultimate net losses on these designated eligible crop insurance contracts,
except as provided in sections II.B.1.c. and II.B.4. The liability for
ultimate net losses not retained by the Company within each State will be
ceded to FCIC in exchange for an equal percentage of the associated net
book premium included in the Assigned Risk Fund in that State.
b. The Company must designate eligible crop insurance contracts to the
Assigned Risk Fund not later than the transaction cutoff date for the week
including the 30th calendar day after the sales closing date for the
eligible crop insurance contract unless:
i. FCIC determines that conditions exist that would
permit the policyholder to plant crops that are
alternatives to the crops listed on the application
for insurance, or there are eligible crop insurance
contracts transferred from the Farm Service Agency
after the sales closing date. The Company may
designate such alternative or transferred crop
insurance contracts to the Assigned Risk Fund not
later than the transaction cutoff date for the week
containing the 30th calendar day after the acreage
reporting date; or
ii. FCIC approves a written agreement for limited or
additional coverage contracts of insurance after the
sales closing date. The Company may designate such
eligible crop insurance contracts to the Assigned
Risk Fund not later than the transaction cutoff date
for the week containing the 30th calendar day after
FCIC approval.
c. Unless otherwise specified in the Agreement, in the event the aggregate net
book premium for all such eligible crop insurance contracts exceeds the
maximum allowable cession for any individual State, the amount ceded for
each eligible crop insurance contract in such State will be reduced
pro-rata to the maximum allowable cession for that State. The net book
premium and associated liability for ultimate net losses that exceed the
maximum allowable cession for an individual State will be placed in the
appropriate Developmental Funds for that State on a pro rata basis.
d. The Assigned Risk Fund maximum cession limits for each State are:
Maximum Maximum
State Cession State Cession
Alabama 50% Montana 75%
Alaska 75% Nebraska 20%
Arizona 55% Nevada 75%
Arkansas 50% New Hampshire 10%
California 20% New Jersey 50%
Colorado 20% New Mexico 55%
Connecticut 35% New York 40%
Delaware 30% North Carolina 20%
Florida 40% North Dakota 45%
Georgia 75% Ohio 25%
Hawaii 10% Oklahoma 50%
Idaho 45% Oregon 30%
Illinois 20% Pennsylvania 25%
Indiana 20% Rhode Island 75%
Iowa 15% South Carolina 55%
Kansas 20% South Dakota 30%
Kentucky 25% Tennessee 35%
Louisiana 50% Texas 75%
Maine 75% Utah 75%
Maryland 20% Vermont 15%
Massachusetts 45% Virginia 30%
Michigan 50% Washington 30%
Minnesota 20% West Virginia 75%
Mississippi 50% Wisconsin 35%
Missouri 20% Wyoming 35%
e. All eligible crop insurance contracts, including CAT, all revenue insurance
plans, and all other insurance plans, that are designated to the Assigned
Risk Fund will be placed in a single fund in each state, which is shown
under "B" in sections II.C. and D.
2. Developmental Funds
a. The Company may designate eligible crop insurance contracts to any of three
Developmental Funds as follows: Fund C CAT; Fund R Revenue insurance plans;
or Fund B All other crop insurance plans.
b. If the Company declares in its Plan of Operations that it will forgo the
use of the Commercial Fund in all States, then all eligible crop insurance
policies not designated to the Assigned Risk Fund will be placed in the
appropriate Developmental Fund.
c. Designations to Developmental Funds must be made:
i. For carryover crop insurance contracts insured
with the Company the previous year that have contract
change dates occurring on or after July 1, not later
than the transaction cutoff date for the week
containing the 30th calendar day after the contract
change date for the applicable crop and insurance
plan for each reinsurance year;
ii. For carryover crop insurance contracts insured
with the Company the previous year that have contract
change dates occurring before July 1, not later than
the transaction cutoff date for the week containing
August 1 of the reinsurance year; and
iii. For all other eligible crop insurance contracts,
not later than the transaction cutoff date for the
week containing the 30th day after the sales closing
date for the eligible crop insurance contract.
d. The Company must retain at least 35 percent of the net book premium and
associated liability for ultimate net losses on eligible crop insurance
contracts placed into each of the Developmental Funds within each State.
The Company may retain a greater percentage of the net book premium and
associated liability for ultimate net losses within any State whenever it
designates percentages greater than 35 percent in its Plan of Operations
for any reinsurance year. Such percentage designations must be in 5 percent
increments. The three Developmental Funds' retention percentages may differ
within a State. The liability for ultimate net losses not retained by the
Company within each State will be ceded to FCIC in exchange for an equal
percentage of the associated net book premium included in the Developmental
Funds in that State.
3. Commercial Funds
a. Any eligible crop insurance contract not designated by the Company to the
Assigned Risk Fund or a Developmental Fund will be placed in one of three
Commercial Funds as follows: Fund C CAT; Fund R Revenue insurance plans; or
Fund B All other crop insurance plans.
b. The Company must retain at least 50 percent of the net book premium and
associated liability for ultimate net losses on eligible crop insurance
contracts designated to each of the Commercial Funds within each State. The
Company may retain percentages of the net book premiums and associated
liability for ultimate net losses within any State whenever it designates
percentages greater than 50 percent in its Plan of Operations for any
reinsurance year. Such percentage designations must be made in 5 percent
increments. The three Commercial Funds' retention percentages may differ
within a State. The liability for ultimate net losses not retained by the
Company within each State will be ceded to FCIC in exchange for an equal
percentage of the associated net book premium included in the Commercial
Funds in that State.
4. Company Minimum Retention
a. After all proportional reinsurance cessions under this Agreement, the
Company must retain a percentage of net book premium and associated
liability for ultimate net losses that equals or exceeds 35 percent of its
book of business. However, if more than 50 percent of the Company's book of
business is in the Assigned Risk Fund or the Company designates eligible
crop insurance contracts only to the Assigned Risk Fund and Developmental
Funds, the Company must retain a percentage of net book premium and
associated liability for ultimate net losses of at least 22.5 percent of
its book of business.
b. In the event that the Company fails to retain the required minimum
percentage of its book of business under this Agreement, the percent of net
book premiums and associated liability for ultimate net losses for all
eligible crop insurance contracts included in the Assigned Risk Fund in all
States will be increased on a pro-rata basis from the 20 percent retention
stated in section II.B.1.a. to the retention necessary to meet the minimum
retention stated in section II.B.4.a.
C. Non-Proportional Reinsurance
1. Company's Responsibility for Ultimate Net Losses
The non-proportional reinsurance provided hereunder applies to the Company's
retained book of business in each individual Fund and State after proportional
cessions under subsection II.B. For each Fund and State, the Company's
responsibility for ultimate net losses will be determined as follows:
a. The Company will retain the following percentages of the amount by which
its retained ultimate net losses in each individual State and Fund exceed
100 percent but are less than or equal to 160 percent of the Company's
retained net book premium in that State and Fund for the reinsurance year.
(B) (C) (R)
i. Commercial Fund 50.0 percent 50.0 percent 57.0 percent
ii. Developmental Fund 25.0 percent 25.0 percent 30.0 percent
iii. Assigned Risk Fund 5.0 percent - - - - - -
b. In addition to the amount determined under section II.C.1.a., the Company
will retain the following percentages of the amount by which its retained
ultimate net losses in each individual State and Fund exceed 160 percent
but are less than or equal to 220 percent of the Company's retained net
book premium in that State and Fund for the reinsurance year.
(B) (C) (R)
i. Commercial Fund 40.0 percent 40.0 percent 43.0 percent
ii. Developmental Fund 20.0 percent 20.0 percent 22.5 percent
iii. Assigned Risk Fund 4.0 percent - - - - - -
c. In addition to the amounts determined under paragraphs II.C.1.a. and b.,
the Company will retain the following percentages of the amount by which
its retained ultimate net losses in each individual State and Fund exceed
220 percent but are less than or equal to 500 percent of the Company's
retained net book premium in that State and Fund for the reinsurance year.
(B) (C) (R)
i. Commercial Fund 17.0 percent 17.0 percent 17.0 percent
ii. Developmental Fund 11.0 percent 11.0 percent 11.0 percent
iii. Assigned Risk Fund 2.0 percent - - - - - -
d. FCIC will assume ultimate net losses in excess of the Company's retained
ultimate losses as determined under paragraphs II.C.1.a., b., and c. In
addition, FCIC will assume 100 percent of the amount by which the Company's
retained ultimate net losses in each individual State and Fund exceed 500
percent of the Company's retained net book premium in that State and Fund
for the reinsurance year.
D. Company's Retention of Underwriting Gain
1. The amount of underwriting gain retained by the Company will be calculated
separately for each Fund within each State as follows:
a. When the loss ratio equals or exceeds 65 percent but is less than 100
percent of the Company's retained net book premium in a Fund and State for
the reinsurance year, the Company will retain the following percentages of
the underwriting gain:
(B) (C) (R)
i. Commercial Fund 94.0 percent 75.0 percent 94.0 percent
ii. Developmental Fund 60.0 percent 45.0 percent 60.0 percent
iii. Assigned Risk Fund 15.0 percent - - - - - -
b. In addition to the amounts of underwriting gain determined in the range of
loss ratios under section II.D.1.a., when the loss ratio equals or exceeds
50 percent but is less than 65 percent of the Company's retained net book
premium in a Fund and State for the reinsurance year, the Company will
retain in that Fund and State the following percentages of the underwriting
gain:
(B) (C) (R)
i. Commercial Fund 70.0 percent 50.0 percent 70.0 percent
ii. Developmental Fund 50.0 percent 30.0 percent 50.0 percent
iii. Assigned Risk Fund 9.0 percent - - - - - -
c. In addition to the amounts of underwriting gain determined in the range of
loss ratios under sections II.D.1.a. and b., when the loss ratio is less
than 50 percent of the Company's retained net book premium in a Fund and
State for the reinsurance year, the Company will retain in that Fund and
State the following percentages of the underwriting gain:
(B) (C) (R)
i. Commercial Fund 11.0 percent 8.0 percent 11.0 percent
ii. Developmental Fund 6.0 percent 4.0 percent 6.0 percent
iii. Assigned Risk Fund 2.0 percent - - - - - -
2. The underwriting gain or loss for each individual Fund will be totaled for
each State to determine the net underwriting gain or loss for that State.
3. The Company's net underwriting gain or loss will be determined by totaling
the net underwriting gains or losses for all States. Any net underwriting
gain will be paid by FCIC to the Company at annual settlement except as
provided in section II.D.4. Any net underwriting loss of the Company will
be paid to FCIC by the Company with each monthly summary report.
4. Reinsurance Account
a. All calculations described in this section are only
applicable to the annual settlement. The balance in the
Company's reinsurance account is subject to the provisions
of section V.U.
b. If the Company's overall gain for all States in any
reinsurance year exceeds 17.5 percent of its retained net
book premium for that reinsurance year, 60 percent of the
amount above 17.5 percent will be held by FCIC in a Company
reinsurance account.
c. If the Company retains an overall loss or an overall gain
less than 17.5 percent of its retained net book premium in
any reinsurance year, any balances in the Company's
reinsurance account will be paid to the Company to the
extent needed to obtain an overall gain of 17.5 percent of
retained net book premium, or a lesser amount if the balance
in the account is not adequate to achieve this percentage.
d. Except only for those funds that are the subject to the
provisions of section V.X. or to litigation or arbitration
between the Company and FCIC, or set-off in accordance with
section V.U., funds from a reinsurance year that have been
placed in this account for any one reinsurance year will be
returned to the Company 2 years after the first annual
settlement for such reinsurance year. Payments will be made
on a first in, first out basis. (For example, any balance
remaining from the 1998 reinsurance year will be paid in
February 2001.)
e. In the event of termination or nonrenewal of this Agreement,
balances in the reinsurance account will be paid, less those
funds that are subject to a claim by FCIC, as follows:
i. If terminated by the Company, 50 percent of the
balance will be paid at the date of the annual
settlement that would have occurred for the first
reinsurance year after termination, and 50 percent
will be paid 1 year later, provided neither the
Company nor any other company associated with the
Company (as determined by FCIC) has applied for
reinsurance under the Act.
ii. Whenever FCIC terminates this Agreement or does not
renew this Agreement or offer any subsequent
Agreement, any remaining balance shall be paid 1 year
after the first annual settlement of the reinsurance
year terminated.
f. Notwithstanding any provision of any earlier Standard
Reinsurance Agreement, any balance in the reinsurance
account accumulated from the 1997 or prior reinsurance years
will be paid out in accordance with section II.D.4. This
provision will be implemented at the time of the annual
settlement for the Agreement in effect for the 1997
reinsurance year. No interest will be paid on such amounts.
E. Commercial Reinsurance
The Company may reinsure commercially its liability for ultimate net
losses remaining after all cessions under this Agreement. When commercial
reinsurance is required in order for the Company to meet the Standards
for Approval (7 C.F.R. part 400, subpart L), the Company must describe in
the Plan of Operations its commercial reinsurance plan and provide the
documentation required by FCIC to assure that the potential liability for
premiums retained after such commercial reinsurance meets the
requirements contained in the Standards for Approval.
SECTION III. SUBSIDIES AND ADMINISTRATIVE FEES
A. FCIC will provide risk subsidy and A&O subsidy on behalf of producers as
follows:
1. Risk subsidy shall be determined as provided by the Act and will
be provided to the Company on the monthly summary report.
2. A&O subsidy for eligible crop insurance contracts will be
determined as set forth below and will be paid to the Company on
the monthly summary report after the Company submits, and FCIC
accepts, the information needed to accurately establish the
premium for such eligible crop insurance contracts.
Notwithstanding the provisions of this section, under no
circumstances will A&O subsidy be paid in excess of the amount
authorized by statute.
a. For any eligible CAT crop insurance contract, 0 percent of
net book premium.
b. For revenue insurance plans that can not increase liability
whenever the market price at harvest exceeds the market
price at the time of planting, 27.0 percent of the net book
premium attributed to such eligible crop insurance
contracts, not to exceed the amount that would have been
paid had each eligible producer purchased limited or
additional coverage under an insurance plan that insures
loss of individual yield.
c. For revenue insurance plans that can increase liability
whenever the market price at the time of harvest exceeds the
market price at the time of planting, 23.25 percent of the
net book premium attributed to such eligible crop insurance
contracts.
d. For eligible crop insurance contracts that provide coverage
under the GRP, 25.0 percent of the net book premium
attributed to such eligible crop insurance contracts.
e. For limited or additional coverage not included in sections
III.A.2. b., c., and d., 27.0 percent of net book
premium attributed to such eligible crop insurance
contracts.
f. The amounts payable under sections III.A.2.b., c., d.,
and e., will be reduced by the amount of administrative
fees applicable to such policies retained by the Company.
g. If the amount of A&O subsidy payable to the Company for
any limited coverage eligible crop insurance contract is
less than the administrative fee retained by the Company on
such contract, the administrative fee will be considered
payment in full for the A&O subsidy on such contract.
B. The Company shall collect administrative fees from producers and may
retain only such amounts as set forth herein:
1. For CAT, $50 for each eligible crop insurance contract, not to
exceed $200 per county and $600 for all counties combined for each
eligible producer. The Company shall retain not more than $100 per
county for each eligible producer as compensation for the costs of
selling and servicing the eligible CAT crop insurance contracts.
In the event the eligible producer is a limited resource xxxxxx as
defined in the regulations, the Company shall submit the required
evidence to FCIC and FCIC shall pay the Company the appropriate
fee on the monthly summary report.
2. For limited coverage, $50 per eligible crop insurance contract,
not to exceed $200 per county and $600 for all counties combined
for each eligible producer. The Company shall retain not more than
$100 per county for each eligible producer. Any fees retained by
the Company will be offset against the A&O subsidy.
3. For additional coverage, $10 per eligible crop insurance contract
to be paid to FCIC by the Company.
C. The amount of A&O subsidy may be adjusted to a level that FCIC determines
to be equitable if issuing or servicing eligible crop insurance contracts
involve expenses that vary significantly from the basis used to determine
the A&O subsidy under this section: Provided: That such A&O subsidy does
not exceed the maximum amount specified by statute.
D. In the event the Company determines that it can deliver eligible crop
insurance contracts for less than the A&O subsidy paid under this
section, it may apply to FCIC for approval to reduce the amount of
producer premium charged to policyholders by an amount corresponding to
the value of the efficiency.
E. With the exception of raisins, the Company may not submit estimated data
for the purpose of establishing premium, liability, or indemnity. For
raisins, the Company may submit estimated reports not to exceed 2 tons
per acre, which will be used to determine the estimated A&O subsidy for
eligible raisin crop insurance contracts. In the event the actual raisin
net book premium is less than this estimate, the Company will include the
excess A&O subsidy as an amount owed to FCIC in the first monthly summary
report after the actual raisin tonnage is known. Interest on this amount,
at the rate set forth in section V.C.2. calculated from the date of
payment by FCIC to the date of the monthly summary report upon which the
actual tonnage is reported, must be included as an amount owed to FCIC.
F. The billing statement provided to the policyholder will contain the
following information:
1. The total premium calculated by adding 2 and 3 below;
2. The risk subsidy and A&O subsidy paid or provided by FCIC
to the Company on behalf of the policyholder; and
3. The amount of premium and any administrative fees due the
Company from the policyholder.
G. All data on which liabilities and premiums are based must be reported by
the Company and accepted by FCIC not later than the transaction cut-off
date for the twelfth week after the week that includes the latest acreage
reporting date specified in the actuarial data master file for any
eligible crop insurance contract insured by the policyholder. The A&O
subsidy for eligible crop insurance contracts under this Agreement will
be reduced if the data are delayed, unless the delay is caused in whole
or in part by FCIC, as follows:
Data Received
During Weeks Reduction
13th through 15th 1.5 percent
-- --
16th through 17th 3.0 percent
-- --
18th or more 4.5 percent
--
H. No A&O subsidy for eligible crop insurance contracts under this
Agreement will be paid if the agent or loss adjuster SSN is not
submitted and accepted by FCIC.
I. A&O subsidy will be paid to the Company beginning with the October
monthly summary report. It will be paid in one installment based on the
data obtained from accepted acreage reports (preliminary tonnage report
for eligible raisin crop insurance contracts) in accordance with
processing provisions contained in Manual 13.
SECTION IV. LOSS ADJUSTMENT EXPENSES
A. For eligible CAT crop insurance contracts, FCIC will pay to the Company
an amount equal to 4.7 percent of the total net book premium for eligible
CAT crop insurance contracts computed at 65 percent of the recorded or
appraised average yield indemnified at 100 percent of the projected
market price, or equivalent coverage, for loss adjustment expense. The
loss adjustment expense specified in this section will be included in the
monthly summary report containing the data obtained from acreage reports
that have met the processing provisions specified in Manual 13. In
addition to the amounts stated in this subsection:
1. If the actual loss ratio on the Company's net book premium of all eligible
CAT crop insurance contracts for the reinsurance year exceeds 60 percent
but is not greater than 160 percent, FCIC will pay to the Company, as loss
adjustment expense, an additional 0.017 percent of the net book premium on
all eligible CAT crop insurance contracts reinsured under this Agreement
for each full point between a 60 percent and 160 percent loss ratio. The
loss adjustment expense payable to the Company under this paragraph will
not exceed 1.7 percent. The loss adjustment expense payable to the Company
under this paragraph for such eligible CAT crop insurance contracts shall
be computed on premium determined at 65 percent of the recorded or
appraised average yield indemnified at 100 percent of the projected market
price, or equivalent coverage.
2. In addition to the amounts stated in section IV.A.1, if the actual loss
ratio on the Company's net book premium of all eligible CAT crop insurance
contracts for the reinsurance year exceeds 160 percent but not greater than
260 percent, FCIC will pay to the Company, as excess loss adjustment
expense, an additional 0.007 percent of the net book premium on all
eligible CAT crop insurance contracts reinsured under this Agreement for
each full point between a 160 percent and 260 percent loss ratio. The
excess loss adjustment expense payable under this paragraph will not exceed
0.7 percent. The excess loss adjustment expense payable under this
paragraph for such eligible CAT crop insurance contracts shall be computed
on premium determined at 65 percent of the recorded or appraised average
yield indemnified at 100 percent of projected market price, or equivalent
coverage.
B. Loss adjustment expenses under section IV.A. will be included in the
monthly summary report that contains losses exceeding the thresholds
specified in section IV.A. and that meet the processing provisions
specified in Manual 13.
SECTION V. GENERAL PROVISIONS
A. Collection of Information and Data
The Company is required to collect and provide to FCIC the SSN or the EIN as
authorized and required by the Food, Agriculture, Conservation, and Trade
Act of 1990 (Pub. L. 101-624), and the regulations promulgated thereunder,
as codified in 7 C.F.R. part 400, subpart Q.
B. Reports
1. The Company must submit accurate and detailed contract data to
FCIC through the DAS in accordance with the requirements of Manual
13. The DAS will only accept, and the Company will only be
required to submit data through the automated system for 3 years
following the first annual settlement for the reinsurance year.
Settlement of claims still in litigation, arbitration, or any
administrative proceeding 3 years after the first annual
settlement for such reinsurance year must be reported to FCIC and
will be processed manually following final resolution of such
action.
2. All reports submitted for reimbursement must be certified by an
authorized officer or authorized employee of the
Company. The required certification statements are contained in
Manual 13.
3. Failure of the Company to comply with the provisions of this
Agreement, including timely submission of the monthly and annual
settlement data and reports, or any other report required by this
Agreement does not excuse or delay the requirement to pay any
amount due to FCIC by the dates specified herein. Failure of the
Company to make payment in accordance with the provisions of this
Agreement is a default of this Agreement by the Company. In
addition to the payment of applicable interest, such actions may
be a basis to suspend or terminate this Agreement.
4. Producer premiums and administrative fees collected by the Company
must be reported on the monthly summary report submitted in the
next calendar month after collection. Producer premiums and
administrative fees that are uncollected for each billing date
must be reported by the Company on the monthly summary report for
the month following the month containing the billing date.
5. All payments due FCIC from the Company will be netted on the
monthly and annual settlement reports with amounts due the Company
from FCIC. Any amount due FCIC as a result of the netting effect
must be deposited on or before the Company's payment date directly
into FCIC's account in the U. S. Treasury by EFT. FCIC will remit
amounts due the Company by EFT on or before the FCIC payment date.
Any amounts due FCIC or the Company that are not timely remitted
are subject to the interest rate provisions contained in section
V. C., with such interest accruing from the date such payment was
due to the date of payment.
6. In the event that a payment would be due to the Company except for
the erroneous rejection of data by FCIC, the Company
shall be entitled to interest accrued on these amounts
for the period of such delay, at the rate provided in section V.
C.1.
7. In addition to the reporting requirements contained in Manual 13,
the Company will provide other information relating to policies
reinsured hereunder as may be requested by FCIC.
8. All payments and reports are subject to post audit by FCIC in
accordance with section V. X.
C. Interest
1. Any interest that FCIC is required to pay the Company under the
terms of this Agreement will be paid in accordance with
the interest provisions of the Contract Disputes Act
(41 U.S.C. 601 et seq.).
2. Any interest that the Company is required to pay FCIC under the
terms of this Agreement will be paid at the simple interest rate
of 15 percent per annum.
3. The Company will repay with interest any amount paid to the
Company by FCIC that FCIC or the Company subsequently determines
was not due.
4. FCIC will repay with interest any amount paid by the Company to
FCIC which FCIC subsequently determines was not due.
D. Escrow Account
1. At the Company's request, FCIC will allow the Company to establish
an escrow account in the name of FCIC at a bank designated by the
Company, and approved by FCIC, to reimburse the Company for
payment of losses to eligible producers by the Company. The
Company's bank must pledge collateral as required by 31 C.F.R. 202
in the amount determined by FCIC. The requirements for funding the
escrow account and monthly balancing are contained in Manual 13
and the Escrow Agreement.
2. Any Company that elects not to utilize escrow funding will be
reimbursed for paid losses validated and accepted on the monthly
summary report.
3. For the purpose of this Agreement, any loss will be considered
paid by the Company when the instrument or document issued as
payment of the indemnity has cleared the Company's bank account.
E. Form Approval
The Company must submit for FCIC's approval all forms incorporated by
reference into the eligible crop insurance contracts reinsured under this
Agreement. Any such forms must not be used by the Company until approved
or otherwise authorized in writing by FCIC.
F. Supplemental Insurance
1. The Company must not sell any contract of insurance or similar
instrument that may shift risk to or otherwise increase the risk
of any eligible crop insurance contract sold or reinsured by FCIC.
The Company must submit any contracts of insurance or similar
instruments to FCIC for review and approval prior to selling them.
FCIC will not reimburse the Company for any loss occurring on an
eligible crop insurance contract if the Company sold a contract of
insurance that FCIC determines to have shifted risk to or
increases the risk of such eligible crop insurance contract
reinsured under this Agreement, or if the Company administers the
contract of insurance in a manner inconsistent with its submission
and the FCIC approval.
2. The Company must maintain and make available to FCIC the SSN and
EIN and underwriting information pertaining to any contract of
insurance written in conjunction with eligible crop insurance
contracts reinsured under this Agreement, including the contract
number of the related eligible crop insurance contract.
G. Insurance Operations
1. Plan of Operations
a. This Agreement becomes effective with respect to any
reinsurance year upon approval of the Company's Plan of
Operations by FCIC. The Plan of Operations must be submitted
to FCIC by April 1 preceding the reinsurance year.
b. The Plan of Operations must meet the requirements and be in
the format as contained in appendix 2.
c. The Company may submit a request to amend an approved Plan
of Operations at any time to reflect changing business
considerations and sales expectations. Such amendments must
be in writing and must be approved by FCIC in writing before
implementation by the Company. The request will be evaluated
following the procedures applicable to a timely filed
original plan, except that FCIC will also consider whether
FCIC's risk is materially increased. Requests for amendment
where the risk has materially increased will only be
considered if FCIC, at its sole discretion, determines that
its actions or those of USDA have substantially increased
the risk of underwriting loss on eligible crop insurance
contracts previously written by the Company.
d. The Plan of Operations is incorporated in this Agreement by
reference. Material failure to follow the Plan of
Operations may be a basis for FCIC to terminate this
Agreement.
2. General Operations
a. All eligible crop insurance contracts reinsured under this
Agreement must be sold by properly trained and licensed
agents. Employees, agents, brokers, solicitors, or any other
sales representatives of the Company who quote premium rates
and coverages or provide other information in the sale of
eligible crop insurance contracts to current or prospective
policyholders must be licensed or certified in crop
insurance if available, or in the property and casualty line
of insurance if a crop insurance license or certification is
not available.
b. The Company shall not permit its sales agents, agency
employees, sales supervisors, or any spouse or family member
residing in the same household as any such sales agent,
agency employee, or sales supervisor to be involved in any
way with the following activities in any county or adjoining
county where the sales agent, agency employee, any competing
agency or sales supervisor performs any sales functions:
i. The supervision, control, or adjustment of any loss;
ii. A determination of a claim or cause of loss; or
iii. Verification of yields for the purpose of
establishing any insurance coverage or guarantee.
c. The Company shall not permit its claims supervisors or any
employee or contractor involved in the determination of the
amount or cause of any loss to be involved in any way with
the sales of any eligible crop insurance contract in any
county or adjoining county in which they perform any loss
adjustment or claims services.
d. The Company shall not permit its sales agents, the owners or
employees of its sales agencies, its sales supervisors, or
any spouse or family member residing in the same household
as any such person, to be involved in underwriting any
eligible crop insurance contract written by any such person.
e. Any person employed by the Company for the general
supervision of the crop insurance program in an area may
supervise activities associated with the general
administration of the crop insurance program in that area,
which may include training, servicing, underwriting, and
loss adjusting. However, all quality control reviews must be
conducted by objective and unbiased persons who were not
involved in establishing the guarantee or adjusting the
loss, or the sales or supervision of sales for the policies
reviewed.
f. The Company must verify all yields and other information
used to establish insurance guarantees and indemnity
payments in accordance with the procedures approved by FCIC.
Guarantees must be verified in accordance with the
requirements of the approved Manual 14 and applicable
procedures.
g. The Company must use crop insurance contracts, standards,
procedures, methods, and instructions as issued or approved
by FCIC in the sales, service, and loss adjustment of
eligible crop insurance contracts.
3. Managing General Agents
If the Company will perform its responsibilities under this
Agreement through a MGA, the Company must certify to FCIC in the
Plan of Operations that such MGA is in full compliance with the
laws and regulations of the State in which such MGA is
incorporated or, in the absence of such laws and regulations, with
the National Association of Insurance Commissioners' Model Act
governing MGAs.
H. Access to Records and Operations
Upon written request, unless otherwise authorized by the Manager of FCIC,
the Company must provide FCIC reasonable access to its offices, personnel
(including agents and loss adjusters), and all records that pertain to
the business conducted under this Agreement at any time during normal
business hours for the purpose of investigation, audit or examination,
including access to records on the operation of the Company. The Company
must designate in its Plan of Operations each location where records and
documents are retained. Records pertaining to premium or liability must
be retained until 3 years after the annual settlement date for the
respective reinsurance year. FCIC may require on a case-by-case basis the
Company to retain certain specified records for a longer period if it so
notifies the Company in writing at any time before disposal of the
record. The Company should be aware that the statute of limitations for
bringing a suit for any breach of this Agreement is 6 years. For the
purpose of this section the term "FCIC" includes all U.S. Government
agencies including but not limited to USDA Office of Inspector General,
the General Accounting Office, and the Department of Labor.
I. Compliance and Corrective Action
1. The Company must be in compliance with the provisions of this
Agreement, the laws and regulations of the United States, the laws
and regulations of the States and locales in which the Company is
conducting business under this Agreement, unless such State and
local laws and regulations are in conflict with this Agreement,
and all bulletins, handbooks, instructions, and procedures of
FCIC.
2. The Company must cooperate with FCIC in the review of Company
operations.
3. If FCIC finds that the Company has not complied with any provision
of this Agreement, and the Company has not taken appropriate steps
to correct the reported act of non-compliance, FCIC may at its
discretion, require that the Company take corrective action within
45 days of the date of such written demand. The Company must
provide FCIC with satisfactory documentary evidence of the
corrective action taken to address the reported act of
non-compliance.
4. Whenever an act or omission by the Company materially affects the
existence or amount of the indemnity or premium paid (including
but not limited to incorrect APH calculations; improper adjustment
of loss; sales agents or sales supervisors involved in the
adjustment of losses; failure to verify eligibility for insurance,
acreage planted or prevented from planting, insurable shares,
insurable causes of loss, unit divisions, or nonstandard
classifications) and FCIC is able to determine the correct amount
of indemnity or premium that should have been paid:
a. FCIC shall require the Company to report to FCIC through
the DAS system the correct amount of indemnity or
premiums, and
b. FCIC may require the Company to refund any A&O subsidy
that exceeds the amount the Company was entitled to
receive.
5. The Company provides valuable program delivery services for which
payment is made in the form of A&O subsidy. FCIC and the Company
agree that FCIC is damaged by a failure of the Company to provide
services or to comply with FCIC requirements and procedures and
that the value of such service or failure to comply is difficult
to determine because damages are uncertain and the amount of
services or failure to comply is difficult to quantify. FCIC and
the Company agree that in view of the difficulty of determining
the exact value of each service, the amounts stated below are
reasonable estimates of the value of such services.
a. If the Company's loss adjustment performance and practices
are not carried out in accordance with this Agreement and
FCIC assumes the Company's loss adjustment obligations, the
Company shall pay FCIC an amount equal to 10 percent of the
net book premium on all eligible crop insurance contracts
adjusted or readjusted by FCIC.
b. If this Agreement should be terminated for cause, the
Company shall pay FCIC the equivalent of 10 percent of the
net book premium for all eligible crop insurance contracts.
c. In the event of the following failures to comply with the
terms and conditions of this Agreement, the Company
shall pay FCIC as follows:
154
i. For failure to follow approved sales agent training
requirements contained in Manual 14, 1 percent of the
net book premium for eligible crop insurance
contracts written by sales agents not trained in
accordance with Manual 14 if, for the purposes of
this subparagraph only, the number of such sales
agents exceeds 5 percent of all sales agents
requiring training;
ii. For failure to follow approved loss adjuster training
requirements contained in Manual 14, 1 percent of the
net book premium for eligible crop insurance
contracts adjusted by loss adjusters not trained in
accordance with Manual 14 if, for the purposes of
this subparagraph only, the number of loss adjusters
exceeds 5 percent of the loss adjusters requiring
training; and
iii. For failure to follow approved quality control review
requirements in Manual 14, 1 percent of the net book
premium for eligible crop insurance contracts not
reviewed in accordance with Manual 14, but which were
required to be reviewed, if the number of reviews not
performed exceeds 5 percent of the number required.
d. For failure to follow FCIC approved procedure that
materially impacts the existence or amount of the loss, the
Company shall pay to FCIC 3 percent of the net book premium
of all eligible contracts for which each failure occurred.
e. The total amount payable under sections V. I. 5. c.
and d. may not exceed 4.5 percent of the net book
premium on each eligible crop insurance contract for which
any payment is due FCIC under sections V. I. 5. c. or d.
6. Any payment due from or paid by the Company under this section shall be
in addition to and without prejudice to any other rights of FCIC, or the
United States, if the deficiency in compliance with terms and conditions
of this Agreement result from the Company's violation of criminal or
civil false claims statutes.
7. FCIC may, at its sole discretion, waive, reduce or delay
repayment.
8. Any amounts due from or paid by the Company under this section
shall be paid by the Company to FCIC on the next monthly summary
or annual settlement report after a final determination by FCIC.
Any payment not timely paid will be subject to provisions of
section V.C.
9. If FCIC collects any amount in accordance with section V. I. 4.
or V.I.5.a. or b., then FCIC will not require the
Company to pay any amount under section V. I. 5.d. on the same
eligible crop insurance contracts.
10. Nothing in this subsection prevents FCIC from collecting any
amounts due under this subsection from the Company and suspending
or terminating this Agreement.
J. Suspension
FCIC may suspend this Agreement for cause due to a material failure to
perform or comply with obligations under this Agreement. If this
Agreement is suspended for cause:
1. The suspension will remain in effect until FCIC determines that
the Company has corrected the failure and has taken steps to
prevent its occurrence.
2. While suspended, the Company may not sell any new crop insurance
contracts under this Agreement. However, if required by FCIC, the
Company must service all eligible crop insurance contracts in
effect at the time of the suspension.
3. If the Company does not properly service existing crop insurance
contracts as required by section X.X.2. or has not corrected the
failure within 45 days of the date the Company is notified of the
suspension, this Agreement will automatically terminate at the end
of the reinsurance year.
K. Termination
1. FCIC may terminate this Agreement for cause due to a material
failure to perform or comply with obligations under this
Agreement. If this Agreement is terminated for cause, FCIC will
not provide reinsurance for eligible crop insurance contracts
issued or renewed after the date of the termination. FCIC will
provide reinsurance for eligible crop insurance contracts in
effect as of the date of the termination until the next
cancellation date.
2. If FCIC terminates this Agreement for the convenience of the
government, FCIC will not provide reinsurance for any eligible
crop insurance contract renewed or issued after the date of
termination. FCIC will continue to provide A&O subsidy, risk
subsidy, and reinsurance to the extent allowed under this
Agreement for eligible crop insurance contracts in effect as of
the date of the termination until the next cancellation date. No
additional damages or amounts will accrue to the Company because
of such termination.
L. Disputes and Appeals
1. The Company may appeal any actions, finding, or decision of FCIC
under this Agreement in accordance with the provisions
of 7 C.F.R. 400.169.
2. FCIC shall generally issue a fully documented decision within 90
days of the receipt of a notice of dispute accompanied by all
information necessary to render a decision. If a decision cannot
be issued within 90 days FCIC will notify the Company within the
90 day period of the reasons why such a decision cannot be issued
and when it will be issued.
M. Renewal
This Agreement will continue in effect from year to year with an annual
renewal date of July 1 of each succeeding year unless FCIC gives at least
180 days advance notice in writing to the Company that the Agreement will
not be renewed. This Agreement will automatically terminate if the
Company fails to submit a Plan of Operations by the date such Plan of
Operations is due unless such other date is approved by FCIC in writing.
N. Appropriation Contingency
The payment of obligations of FCIC under this Agreement are contingent
upon the availability of appropriations. Notwithstanding any other
provision of this Agreement, FCIC's ability to sustain the Agreement
depends upon the FCIC's appropriation. If FCIC's appropriation is
insufficient to pay the obligations under this Agreement, and FCIC has no
other source of funds for such payments, FCIC will reduce its payments to
the Company on a pro rata basis or on such other method as determined by
FCIC to be fair and equitable.
O. Replacement
This Agreement replaces any previous Standard Reinsurance Agreement
between FCIC and the Company, except that any obligations continuing
under any previous Agreement will remain subject to the terms and
conditions of such previous Agreement.
P. Cut-Through and Preemption of State Law
1. Whenever the Company and its policy issuing company, if applicable, are
unable to fulfill their obligations to any policyholder by reason of a
directive or order duly issued by any Department of Insurance, Commissioner
of Insurance, or by any court of law having competent jurisdiction, or
under similar authority of any jurisdiction to which the Company is
subject, all eligible crop insurance contracts affected by such directive
or order that are in force and subject to this Agreement as of the date of
such inability or failure to perform will be immediately transferred to
FCIC without further action of the Company by the terms of this Agreement.
FCIC will assume all obligations for unpaid losses whether occurring before
or after the date of transfer, and the Company must pay FCIC all funds in
its possession with respect to all such eligible crop insurance contracts
transferred including, but not limited to, premiums collected. The Company
hereby assigns to FCIC the right to all uncollected premiums on all such
policies. No assessment for any guarantee funds or similar programs may be
computed or levied on the Company by any State for or on account of any
premiums payable on eligible crop insurance contracts reinsured under this
Agreement.
2. The provisions of 7 C.F.R. part 400, subpart P pertaining to preemption of
State or local laws or regulations are specifically incorporated herein and
made a part hereof.
Q. Litigation and Assistance
1. The Company's expenses incurred as a result of litigation are
covered by the A&O subsidy and the administrative fee paid by the
producer for CAT coverage. FCIC has no obligation to provide any
other funds to reimburse the Company for litigation costs.
2. FCIC will also provide indemnification, as authorized by the Act,
including costs and reasonable attorney fees incurred by the
Company, that result solely from errors or omissions of FCIC.
3. The Company may request FCIC to provide non-monetary assistance,
including witnesses, documents, and direction or such other
assistance as FCIC deems reasonable. FCIC may, at its option,
elect to provide such assistance or it may elect to intervene in
any legal action. The Company agrees not to oppose such
participation. FCIC will only agree to the Company's request for
litigation assistance if the Company:
a. Immediately notifies FCIC in writing of the requested
action setting forth the reasons such action would be in
the best interests of FCIC;
b. Presents all legal arguments favorable to its defense
including those suggested by FCIC; and
c. Does not join FCIC as a party to the action unless
FCIC agrees in writing to be joined as a party.
0. 4. FCIC will, at its sole discretion, determine if the requested
action under this section will be granted. The criteria
to determine such action will be whether such action is in
the best interest of FCIC and the crop insurance program.
R. Suspension and Debarment
Any person or business entity who has been debarred or suspended by FCIC
or any other U.S. Government Agency, may not be used by the Company in
any manner which involves performance under this Agreement.
S. Member - Delegate
No member of or delegate to Congress nor any resident commissioner will
be admitted to any share or part of this Agreement or to any benefit that
may arise therefrom, except that this provision will not be construed to
apply to a benefit from this Agreement that accrues to a corporation for
its general benefit. Members of or delegates to Congress are eligible to
purchase a crop insurance contract for any crop in which they have an
insurable interest.
T. Discrimination
The Company must not discriminate against any employee, applicant for
employment, insured, or applicant for insurance because of race, color,
religion, sex, age, physical handicap, marital status, or national
origin.
U. Set Off
1. 1. Funds due from the Company may be set off under the provisions of
this Agreement or under the provisions of 31 U.S.C. chapter 37.
2. Any amount due the Company under this Agreement is not subject to
any lien, attachment, garnishment, or any other similar process
prior to that amount being paid under this Agreement, unless such
lien, attachment, or garnishment arises under title 26 of the
United States Code.
3. Set off as provided in this section will not deprive the Company
of any right it might otherwise have to contest the indebtedness
involved in the set off action by administrative appeal.
4. In the event a Company fails to pay any amount when due under this
Agreement, any further payments to the Company from FCIC will be
set off against any amounts due FCIC regardless of reinsurance
year until these amounts are paid with appropriate interest.
5. If an assignment has been made pursuant to the provisions of
section V.V. the following provisions will apply with
respect to set off:
a. Notwithstanding the assignment, FCIC may set off:
i. Any amount due FCIC under this Agreement;
ii. Any amounts for which the Company is indebted to the
United States for taxes for which a notice of lien
was filed or a notice of levy was served in
accordance with the provisions of the Internal
Revenue Code of 1954 (26 U.S.C. 6323), or any
amendments thereto or modifications thereof, before
acknowledgment by FCIC of receipt of the notice of
assignment; and
iii. Any amounts, other than amounts specified in
paragraphs i. and ii. above due to FCIC or any
other agency of the United States, if FCIC notified
the assignee of such amounts to be set off at or
before the time acknowledgment was made of receipt
of the notice of assignment.
V. Assignment
No assignment by the Company shall be made of the Agreement, or the
rights thereunder, unless the Company assigns the proceeds of the
Agreement to a bank, trust company, or other financing institution,
including any federal lending agency, or to a person or firm that holds a
lien or encumbrance at the time of assignment, and the Company receives
the prior approval of FCIC to assign the proceeds of this Agreement to
any other person or firm: Provided, That such assignment will be
recognized only if and when the assignee thereof files with FCIC a
written notice of the assignment together with a signed copy of the
instrument of assignment, and, Provided further, That any such assignment
must cover all amounts payable and not already paid under the Agreement,
shall not be made to more than one party and shall not be subject to
further assignment, except that any such assignment may be made to one
party as agency or trustee for two or more parties.
W. Liability for Agents and Loss Adjusters
The Company is solely responsible for the conduct and training of its
personnel, agents and loss adjusters within the parameters of this
Agreement. Liability incurred, to the extent it is caused by agent or
loss adjuster error or omission, or failure to follow FCIC approved
policy or procedure, is the sole responsibility of the Company. The
assumption of responsibility under this section is only for the purpose
of this Agreement and may not be relied upon by any person or entity not
a party to this Agreement for any purpose. Reinsurance of eligible crop
insurance contracts may only be denied if there exists a pattern of
failure to follow FCIC-approved policies or procedures, or allowance of
errors or omissions, or the Company knew or should have known of the
failure to follow FCIC-approved policies or procedures, or errors or
omissions, and failed to take appropriate action to correct the
situation.
X. Performance Audit
Notwithstanding any other provision hereunder, FCIC must notify the
Company that the Company may be responsible for an error, omission, or
failure to follow FCIC approved policy or procedures; and that a debt may
be owed; within 3 years of the end of the insurance period during which
the error, omission, or failure is alleged to have occurred. The failure
to provide timely notice required herein shall only relieve the Company
from liability for the alleged debt owed. Three years after the first
annual settlement, such reinsurance year shall be deemed finally closed
unless there are claims still under investigation or in litigation,
including administrative proceedings, or arbitration. Such time frames
will not be applicable to errors, omissions or procedural violations that
are willful or intentional.
Y. Resolution of Disagreements
If the Company disagrees with an act or omission of FCIC, except those
acts implemented through the rulemaking process, the Company shall
provide written notice of such disagreement to the Manager of FCIC.
Within 10 business days of receipt of notice, the Manager or a designee
will schedule a meeting with the company in an attempt to resolve the
disagreement. Notwithstanding any other provision in this section, any
subsequent decision by FCIC on the act or omission will be final in the
administrative process and, therefore subject only to review by the Board
of Contract Appeals in a matter relating to this Agreement or to judicial
review. Nothing herein excuses the Company's performance under this
Agreement during the attempted resolution of the dispute or constitutes a
waiver of the Company's right to any remedy authorized by law.
SECTION VI. Certification
The undersigned acknowledges that the Company's Board of Directors has
authorized the Company to enter into this Agreement and the Plan of
Operations. The undersigned acknowledges any misrepresentation in the
submission of this Agreement and information contained in the Plan of
Operations may result in civil or criminal liability against the
undersigned or their representatives.
APPROVED AND ACCEPTED FOR
THE FEDERAL CROP
INSURANCE CORPORATION THE COMPANY
Signature Signature
Name Name
Title Title
Date Date
