05 Sra

05SRA_final.pdf

Standard Reinsurance Agreement Plan of Operations

05 SRA

OMB: 0563-0069

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FINAL with technical corrections incorporated
STANDARD REINSURANCE AGREEMENT
between the
FEDERAL CROP INSURANCE CORPORATION
and the

(Insurance Company Name) (Hereafter “Company”)

(City and State)
This Agreement establishes the terms and conditions under which the Federal Crop Insurance
Corporation (FCIC), supervised by the Risk Management Agency (RMA) as authorized in
section 226A of the Federal Agriculture Improvement and Reform Act of 1996, will provide
subsidy and reinsurance on eligible crop insurance contracts sold by the Company. This
Agreement is authorized by the Act and regulations of FCIC published at 7 C.F.R. chapter IV
(regulations).
This is a cooperative financial assistance agreement between FCIC and the Company to deliver
eligible crop insurance contracts 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 Table of Contents and
headings in this Agreement are descriptive only and have no legal effect on FCIC or the
Company.
This Agreement becomes effective upon its execution and the approval of the Company's Plan
of Operations by FCIC for the applicable reinsurance year.

FINAL with technical corrections incorporated
TABLE OF CONTENTS
Pages
I.

Definitions

II.

Reinsurance

1-5

General Terms (Restrictions and eligibility for reinsurance;
6-9
rebating; cooperative association paying CAT fees;
licensing; certification and training; limitation on
underwriting; requirement to have financial and operational
resources, organization, experience, internal controls, and
technical skills; satisfactory performance record; fund
designation delegation; large claims review; and preclusion of service fees)

Reinsurance (Fund designations and timing, Assigned Risk
Fund retentions and cession limitations, Developmental
and Commercial Fund designations and retentions,
minimum retentions, underwriting losses and gains,
retained net book quota share, Contingency Fund,
commercial reinsurance, and additional FCIC reinsurance)

9-15

III. Subsidies, Expenses, Fees, and Payments
A.

Subsidies and Expenses (Risk subsidies, A&O subsidies
for CAT and additional coverage policies, A&O adjustments,
SSN collection for agents and loss adjusters, timing of
payments, and CAT loss adjustment reimbursement)

15-17

Administrative Fees (Limited resource farmers, and FCIC collection 17
of fees)

Payments (Payments due FCIC or the Company, accrual of
interest, compromise and settlement of disputes with FCIC,
three year limitation on collection of funds)

18-19

IV. General Provisions
A.

Collection of Information and Data (Collecting and submitting
SSNs and EINs, and non-disclosure of information submitted by
the policyholder)

Reports (Collecting, maintaining and submitting crop
insurance data; automated transmissions; certification of
reimbursements of funds; reporting premium and
administrative fees; reporting deadlines and reductions

19-21

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in A&O; use of estimated data; summary of coverage, and
reporting material changes)
C.

Interest (Interest owed to the Company, interest owed
to FCIC, and interest accrual)

Escrow Account (Establishments, request for funding,
and draw of funds)

Supplemental Insurance (Limitations, consequences, and
underwriting information)

22-23

Insurance Operations (Verification of information;
use eligible crop insurance contracts; standards, procedures,
methods, and instructions as issued by FCIC; form creation;
Plan of Operations; compliance with State insurance laws; and
conflict of interest)

23-27

Access to Records and Operations (Access to offices,
personnel and records; affiliate compliance; record location;
record retention; unsatisfied debt record retention; and other
Government agencies)

27-28

Compliance and Corrective Action (Company and affiliate
compliance and liability for errors, omissions, or failure
to comply; compliance with State law; cooperation in
reviews or examinations; non-compliance with State law; and
consequences of non-compliance with the Agreement or
procedures)

28-31

Suspension (Durations, limitations on sales, effect of
failure to correct or improper service, Company
elected non-renewal, and cancellation and effect of failure
to cancel eligible crop insurance contracts)

Termination (Cause or convenience, effective date,
effect on reinsurance and A&O, Company payment of
10 percent net book premium, and cancellation of eligible
crop insurance contracts)

Disputes and Appeals (Final administrative determinations,
and issuance of decision)

Renewal and Mandatory Amendments (180 day notice of
non-renewal, and Federal law changes incorporated)

32-33

iii

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M.

Appropriation Contingency (Payment of any funds
contingent on appropriations)

Replacement (Agreement replaced but obligations
determined by Agreement in effect when obligation
incurred)

Oversight and Cut-Through (Consequences of inability
to perform under the Agreement, effect of supervision,
rehabilitation or liquidation, and transfer and service of
eligible crop insurance contracts)

33-35

Preemption of State Law (In accordance with Act,
incorporation of 7 CFR part 400, subpart P, and
preclusion of State guarantee fund fees)

Supervision, Rehabilitation, and Liquidation (Effect of
supervision, rehabilitation, and liquidation; access to
systems, records, and equipment; priority in liquidation;
FCIC takeover of policies; payment of funds and right to
uncollected amounts owed; and responsibility of Company
until transfer)

35-36

Mediation, Arbitration, Litigation and Assistance
(Litigation expenses covered by A&O, FCIC
indemnification of its errors or omissions, nonmonetary litigation assistance, notice of disputes,
payment of interest, information to be provided to
FCIC, prohibition of FCIC paying punitive or consequential
damages, and attorney fees or any other costs, including
court costs)

36-38

Sanctioned Persons (Prohibition against the use of
disqualified, debarred, suspended or voluntarily excluded
person or entity)

Member – Delegate (Limitation of members of Congress
receiving benefit under the Agreement, except the
purchase of crop insurance if have an interest)

Discrimination (Prohibition against discrimination)

Set Off (When set-off applicable; limitation of
availability of lien, attachment, garnishment, or any
other similar process; and effect of assignment)

38-39

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W.

Assignment (Limitation of availability, assignments)

39-40

Resolution of Disagreements (Schedule meeting to discuss
Dispute, and appeal to the Board of Contract Appeals)

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SECTION I. DEFINITIONS
To the maximum extent practicable, terms that have been defined in the incorporated regulations and
the Act will be given the same meaning for the purpose of this Agreement. Since some terms may
have more than one definition in the regulations and the Act, the specific regulation or section of the
Act to be used will be specified herein.
“Act” in lieu of the definition in the incorporated regulations, means the Federal Crop Insurance Act
(7 U.S.C. 1501 et seq.) and section 536 of the Agricultural Research, Extension, and Education
Reform Act of 1998 (7 U.S.C. 1506 note).
“Actuarial data master file” means the hard copy and electronic data processing (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” has the same meaning as the term “additional coverage” in section 502(b)(1)
of the Act.
"A&O subsidy" means the subsidy for the administrative and operating expenses paid by FCIC on
behalf of the policyholder to the Company for eligible crop insurance contracts.
“Administrative fee” means the processing fee the policyholder must pay under an eligible crop
insurance contract.
“Affiliate” means any person, including, but not limited to, a managing general agent, agent, service
provider and loss adjuster, that: 1) collects premiums, services the policy, adjusts, or settles claims; 2)
collects, processes, manages and reports electronic data for the purposes of selling, administering, or
servicing eligible crop insurance contracts for the Company; or 3) directly or indirectly, through one or
more intermediaries, has the authority to control any aspect of the management of the book of business
or any other decision made under this Agreement, without the prior and specific approval from the
Company. This definition excludes commercial reinsurers and PICs if such reinsurers or PICs do not
have the authority to control any aspect of the management of the book of business or any other
decision made under this Agreement, without the prior and specific approval from the Company.
“Agency” means the person authorized by an AIP, or its designee, to sell and service eligible crop
insurance contracts under the Federal crop insurance program.
“Agent” means the individual licensed by the State in which an eligible crop insurance contract is sold
and serviced for the reinsurance year, and who is under contract with the Company, or its designee, to
sell and service such eligible crop insurance contracts.
“Agreement” means this Standard Reinsurance Agreement, including Appendices, the Act, and
regulations, in effect as of the July 1 start of the reinsurance year, unless otherwise provided for in the
Agreement. An Agreement in effect for a reinsurance year constitutes a separate and distinct
Agreement from any Agreement that may be in effect for any other reinsurance year, even if the
Agreement has been renewed in accordance with section IV.L. Unless specifically provided for in this

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Agreement, if there is a conflict between a provision of the Act, the regulations, or procedures with the
terms of this Agreement, the order of precedence will be: (1) the provisions of the Act; (2) the
regulations; (3) this Agreement; and (4) the procedures, with (1) controlling (2) and (2) controlling (3),
etc. The Act and regulations are available on the RMA website (www.rma.usda.gov).
“Agricultural commodity” has the same meaning as the term “agricultural commodity” in section
518 of the Act (7 U.S.C. 1518), excluding livestock.
“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 insurance provider (AIP)” means a legal entity, including the Company, which has
entered into a Standard Reinsurance Agreement with FCIC for the applicable 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.
“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” has the same meaning as the term “cancellation date” in the applicable eligible
crop insurance contract.
"Cede" means to pass to another all or part of the net book premium and associated liability for
ultimate net losses on eligible crop insurance contracts.
“Claim” means a request under an eligible crop insurance contract for an indemnity in an amount
certain on a Company form that meets FCIC’s standards.
“Claims supervisor” means any person having immediate or day-to-day supervisory control,
management or oversight authority of the activities of loss adjusters or other persons who determine
whether an indemnity will be paid and the amount thereof.
“Company payment date” means the last business day of the month.
“Contract change date” has the same meaning as the term “contract change date” in the applicable
eligible crop insurance contract.
"Data Acceptance System (DAS)" means any EDP system that receives, and accepts or rejects
Company-submitted data for eligible crop insurance contracts.
“Eligible crop insurance contract” means an insurance contract for an agricultural commodity
authorized by the Act and approved by FCIC, with terms and conditions in effect as of the applicable
contract change date, that is sold and serviced consistent with the Act, FCIC regulations, the

FINAL with technical corrections incorporated
procedures and this Agreement, having a sales closing date within the reinsurance year, and with an
eligible producer.
“Eligible producer” means a person who has an insurable interest in an agricultural commodity, who
has not been determined ineligible to participate in the Federal crop insurance program, and who
possesses a United States issued social security number (SSN) or employer identification number
(EIN).
“Familial relationship” means the same as “relative.”
“FCIC payment date” means the first banking day following the 14th calendar day after FCIC
receives the signed, certified monthly or annual settlement report and supporting data from the
Company upon which any payment is based.
“Insurable interest” has the same meaning as the term “share” in the applicable eligible crop
insurance contract.
“Loss adjuster” means a person who verifies information affecting the coverage and makes factual
determinations regarding the existence or amount of loss under an eligible crop insurance contract.
“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” means an entity that meets the definition of managing general agent
under the laws of the State in which such entity is incorporated and in every other state in which it
operates, or in the absence of such State law or regulation, meets the definition of a managing general
agent or agency in the National Association of Insurance Commissioners Managing General Agents
Act, or successor Act.
“Material” means an act or omission that, as determined by FCIC, would: 1) cause FCIC to assume a
significant additional risk it would not otherwise have assumed but for the act or omission; 2) cause
the amount paid by or to FCIC to significantly differ from the amount that would otherwise be paid or
owed but for the act or omission; 3) likely preclude or make it substantially more difficult to carry out
the requirements of the Agreement and procedures; or 4) create a program vulnerability that could
cause a payment to be made that would be significantly different than would otherwise be made if the
act or omission had not occurred.
“Net book premium” means the total premium as determined in section IV.B.10. calculated for all
eligible crop insurance contracts, less A&O subsidy, cancellations, adjustments and administrative
fees.
“Person” means an individual or legal entity.
“Plan of insurance” means a type of a crop insurance contract such as a revenue or a group risk plan
of insurance.

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“Plan of Operations” means the documents and information the Company must submit in accordance
with section IV.F.2., Appendix II, and applicable procedures.
“Policy Issuing Company (PIC)” means an insurance company that issues eligible crop insurance
contracts reinsured under this Agreement on behalf of the Company.
“Policyholder” means an eligible producer who has been issued one or more eligible crop insurance
contracts.
“Procedures” means the applicable handbooks, manuals, bulletins, memorandums or other directives
issued by FCIC related to the eligible crop insurance contract and this Agreement.
“Producer premium” means that portion of the premium for an eligible crop insurance contract
payable by the policyholder.
“Rebate” means a direct or indirect benefit (including money, goods or services for which payment is
usually made [except any service provided to fulfill an obligation of the Company under this
Agreement]) provided to an eligible producer contingent upon the purchase of an eligible crop
insurance contract from the Company or its affiliate.
“Records” means documentation in any form that relates to an eligible crop insurance contract or this
Agreement. Such documentation includes original signed documents and any other documents or
electronic information either produced by the Company or its affiliate or obtained from outside
sources or the policyholder that are utilized by the Company or its affiliate to establish, calculate,
verify or determine a policyholder’s program eligibility, insurance coverage, actual production history
(APH) yields, premium, liability, or indemnity.
“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.
“Relative” means an individual who: 1) is a parent, brother, sister, child, spouse, grandchild, or
grandparent; or 2) either resides in the household of, or engages in business with respect to a farming
operation with, the person in question regardless of whether or not the individual is related by blood,
adoption or marriage.
“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 ceded to FCIC under this Agreement.
“Risk subsidy" means that portion of the premium for an eligible crop insurance contract paid by
FCIC on behalf of the policyholder.
“Sales closing date” has the same meaning as the term “sales closing date” in the applicable eligible
crop insurance contract.

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“Sales supervisor” means any person having immediate or day-to-day supervisory control,
management or oversight authority of the activities of sales agents or sales agency employees on
behalf of the Company.
“Satisfactory performance record” means a record of performance that demonstrates substantial
conformity with applicable requirements, as specified in section II.A.9. Continued failure to meet
such requirements is a determining factor in evaluating satisfactory performance.
“Service provider” means managing general agents, and any other entity (other than an agent or
agency) who issues or services eligible crop insurance contracts, prepares or transmits data, or, who on
a regional, State or other area basis, provides loss adjustment services. Regardless of any other factor,
a service provider is an affiliate.
“Signature” means the affixing of a person's name in a distinctive way as a form of identification or
authorization, including in an electronic or digital form as approved by FCIC.
“Transaction cutoff date” for weekly data reporting is 8 p.m. Central time on Friday of each week
and for monthly data reporting is 8 p.m. Central time on Friday after the first Sunday of the month.
Notwithstanding any other Standard Reinsurance Agreement, this definition shall apply to all prior
Standard Reinsurance Agreements.
“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, arbitration award, or mediation (including any interest awarded as specified in section
IV.R.5.a.) rendered on account of a claim under an eligible crop insurance contract, less any recovery
or salvage by the Company.
“Underwriting” means the determination of the terms and conditions by which the Company will
accept the risk for an eligible crop insurance contract.
“Underwriting Capacity Manager” (UCM) means an FCIC system that monitors the amount of
insurance authorized to be insured or reinsured, and accepts or rejects the application of an eligible
producer based on the availability of such amount of insurance, if limits have been placed by Federal
legislation or FCIC on the amount of insurance authorized to be insured or reinsured.
“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.

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SECTION II. REINSURANCE
A.

General Terms
1.

Only eligible crop insurance contracts will be reinsured and subsidized under this
Agreement. Notwithstanding paragraph 2., applications for eligible crop insurance
contracts that are rejected by the UCM, as applicable, will not be eligible for reinsurance or
A&O or risk subsidies.

Except as specified below, the Company must offer and market all plans of insurance for
all crops in any State where actuarial documents are available in which it writes an eligible
crop insurance contract and must accept and approve applications from all eligible
producers. The Company may not cancel an eligible crop insurance contract held by a
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.

In exchange for the reinsurance premiums provided by the Company pursuant to this
Agreement, FCIC will provide the Company with reinsurance in accordance with the
provisions of this Agreement.

A Company and its affiliates are prohibited from providing a rebate except as authorized in
sections 508(b)(5)(B) and (e)(3) of the Act (7 U.S.C. 1508(b)(5)(B) and 1508(e)(3)). For
the purposes of this paragraph, the term “cooperative association” means a farmer or
rancher-owned and controlled business that is recognized by the U.S. Department of
Agriculture, including FCIC, as a cooperative related to agriculture. The term “trade
association” will be defined in procedures; however, a trade association shall not include an
organization that is formed for the purposes of providing insurance.

Violation of paragraph 4. will result in the denial of reinsurance (which, as used throughout
this Agreement, includes A&O subsidy and risk subsidy) for all eligible crop insurance
contracts for which such violation occurred and may subject the person who committed the
violation to administrative sanctions, including disqualification under the Act or applicable
regulations.

The Company shall ensure that all of its employees, agents, agency employees, loss
adjusters and contractors that act on behalf of the Company with respect to the applicable
procedures and requirements associated with selling and servicing eligible crop insurance
contracts are properly licensed by the State in which they are doing business if required by
the State, certified by FCIC, as applicable, and trained in accordance with Appendix IV.
Such training shall include curricula concerning requirements under applicable Federal
civil rights statutes; and methods to encourage participation of limited resource, women,
minority, and under served producers.

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a.

The Company is responsible for the development and maintenance of training
records in accordance with section IV.G. (similar records shall be kept regarding
certification of loss adjusters, agents, and others required under this Agreement, as
applicable) that contain:
i. A list of the individuals who must be trained and the training required for each;
ii. A copy of the curriculum used for all required training sessions;
iii. When, where, how, and by whom such training was provided; and
iv. A list of all individuals who successfully completed the required training.

Any employee, agent, agency employee, loss adjuster and contractor who is not
licensed if required by the State in which they are doing business, who does not
successfully complete the training required by FCIC, or is not certified if required
by FCIC, may not act on behalf of the Company with respect to the sales or service
of eligible crop insurance contracts.

Only the amount of net book premium authorized by FCIC in the approved Plan of
Operations, including any amendments under section IV.F.2.e., may be reinsured and
subsidized under this Agreement.

The Company shall have the financial and operational resources, organization, experience,
internal controls, and technical skills to meet the requirements, including addressing
reasonable risks, associated with the Agreement, including 7 C.F.R. part 400, subpart L, as
determined by FCIC. The Company shall provide information necessary to evaluate
compliance with this paragraph as often as required by FCIC. If at any time during the
reinsurance year FCIC cannot determine that the Company is in compliance with the
requirements of this paragraph or FCIC learns that the Company may be in substantial risk
for failure to comply with the requirements of this paragraph, the Company must take
corrective actions acceptable to FCIC in accordance with section IV.H.4., or be subject to
the remedies provided for in this Agreement.

The Company must demonstrate a satisfactory performance record to obtain an Agreement
and continue to hold an Agreement. The following will be reviewed to determine whether
there is a satisfactory performance record:
a.

In the most recent five reinsurance years, the Company and service providers must
demonstrate:
i.

Substantial conformity with the requirements of this Agreement, the regulations
and procedures of FCIC as applicable;

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10.

ii.

Any material deficiency was caused by circumstances beyond the Company’s
control, and where, as soon as the Company discovered the deficiency, the
Company took timely and appropriate corrective action;

iii.

There was no material misconduct on the part of the Company or its service
providers; and

iv.

To the satisfaction of FCIC, any other mitigating factors that would prove,
notwithstanding any identified deficiency, the Company has a satisfactory
performance record;

Whether the Company can, to the satisfaction of FCIC, demonstrate the ability to
comply with the requirements of paragraph 8.;

Whether the Company can demonstrate the ability to fulfill the requirements under
this Agreement under various risk assessment scenarios, including but not limited to
significant nationwide losses, the loss or failure of a service provider or other risks as
identified by FCIC;

Whether FCIC or a State has identified any material deficiencies that may raise
questions or concerns regarding the Company’s ability to meet the requirements of
this Agreement; and

If the Company previously has not been an AIP, it must demonstrate a reasonable
probability that it will be able to maintain a satisfactory performance record under
this paragraph.

Failure to meet the conditions stated in paragraphs 8. and 9., may subject the Company to
appropriate remedies in this Agreement, including but not limited to denial of an
Agreement, suspension of the Agreement or a reduction in the net book premium the
Company is authorized to write.

11. Unless otherwise specifically approved by FCIC in advance in writing, the Company may
only delegate its authority or control over the designation of eligible crop insurance
contracts to the reinsurance funds to its managing general agent and the Company must
include the delegation in its Plan of Operation.
12.

Failure of the Company to comply with the provisions of this Agreement, including timely
submission of data and reports, does not excuse or delay the Company’s requirement to pay
any amount due to FCIC by the dates specified herein.

13.

As a condition of reinsurance, prior to commencing any loss adjustment activities the
Company must notify FCIC upon receiving notice of a potential claim on an eligible crop
insurance contract, which is likely to exceed $500,000, or such other amount as determined
by FCIC.

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14.

Within 3 business days of receiving notice by the Company, in accordance with FCIC
procedures, of a potential claim under this subsection, FCIC will contact the
Company to make arrangements to coordinate efforts, if FCIC determines such
arrangements are required. FCIC, at its discretion, retains the right to participate in
loss determinations in accordance with section V. of Appendix IV, and determine,
revise, modify or correct any claim under this paragraph before such amounts may be
paid. The Company may not conduct loss adjustment activities until the Company
has either received the notification by FCIC described herein or the time period
described herein has expired.

Company loss payments approved by FCIC will relieve the Company of further
review by FCIC.

In the event FCIC participates in the field inspection in accordance with Appendix IV
and loss determination, or determines, revises, modifies or corrects any claim for loss,
FCIC shall be responsible for all subsequent disputes by the policyholder under the
eligible crop insurance contract that relate to the actions of FCIC. The Company
shall provide FCIC with cooperation and assistance as needed in any dispute.

For the purposes of this paragraph and section V. of Appendix IV only, the term
“potential claim” means receipt of a notice of loss on an eligible crop insurance
contract that may result in an indemnity.

The Company shall fully cooperate with FCIC in the collection of information required
under section 10708 of the Farm Security and Rural Investment Act of 2002.

15. Neither the Company nor its affiliates shall assess service fees or additional charges on
eligible crop insurance contracts reinsured and subsidized under this Agreement except as
authorized by the Act or approved by FCIC in writing.
B.

Reinsurance
1.

Within each State, the Company, in accordance with its Plan of Operations, must designate
an eligible crop insurance contract to the Assigned Risk Fund, Developmental Fund, or
Commercial Fund.

Unless otherwise specified in Appendix III, the Company must designate eligible crop
insurance contracts to a Fund not later than the transaction cutoff date for the week
containing the 30th calendar day after the sales closing date for the eligible crop insurance
contract, except:
a.

In the case of written agreements requiring annual FCIC approval or for the initial
year of an eligible crop insurance contract associated with a written agreement only
(excluding written agreements specified in Appendix III), the Company may
designate such eligible crop insurance contract to any fund not later than the

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transaction cutoff date for the week containing the 30th calendar day after FCIC
approval;
b.

For the initial year of application for any agricultural commodity without a fixed sales
closing date, the later of the transaction cutoff date for the week containing the 30th
calendar day after the eligible producers signature date, or the transaction cutoff date
for the week containing the 30th calendar day prior to the cancellation date; and

c. For the subsequent year of insurance for any agricultural commodity without a fixed
sales closing date, the transaction cutoff date for the week containing the 30th calendar
day prior to the cancellation date for the previous year.

Assigned Risk Fund
The Company may designate eligible crop insurance contracts that have an aggregate net
book premium not greater than the maximum cession limits specified in this paragraph to
the Assigned Risk Fund for each State. The net book premium associated with eligible
crop insurance contracts for pilot programs, as solely determined by FCIC, will not count
against the maximum cession limits.
a.

The Company must retain the percentage of the net book premium and associated
liability for ultimate net losses on eligible crop insurance contracts designated to the
Assigned Risk Fund in accordance with the table in subparagraph b., except as
provided in paragraph 6. The net book premium and associated liability for ultimate
net losses not retained by the Company within the Assigned Risk Fund for each State
will be ceded to FCIC.

The maximum premium cession limits to the Assigned Risk Fund and retention of
ceded premium by the Company for each State are:

State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho

Maximum
Premium
Cession
75%
75%
75%
50%
50%
75%
75%
50%
50%
75%
50%
50%

Retention
of Ceded
Premium
15%
15%
15%
20%
20%
15%
15%
20%
20%
15%
20%
20%

Maximum
Premium
State
Cession
Montana
75%
Nebraska
25%
Nevada
75%
New Hampshire
75%
New Jersey
50%
New Mexico
75%
New York
50%
North Carolina
75%
North Dakota
75%
Ohio
25%
Oklahoma
75%
Oregon
75%

Retention
of Ceded
Premium
15%
25%
15%
15%
20%
15%
20%
15%
15%
25%
15%
15%

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Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
c.

25%
25%
25%
50%
50%
75%
75%
50%
75%
50%
25%
75%
50%

Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

50%
75%
75%
50%
50%
75%
75%
75%
50%
50%
75%
50%
75%

20%
15%
15%
20%
20%
15%
15%
15%
20%
20%
15%
20%
15%

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.

Developmental Funds
a.

Any eligible crop insurance contracts designated by the Company to the
Developmental Fund will be placed into one of three Developmental Funds as
follows:
Fund C
Fund R
Fund B

25%
25%
25%
20%
20%
15%
15%
20%
15%
20%
25%
15%
20%

CAT;
Revenue insurance plans; or
All other crop insurance plans.

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 designated to each
of the Developmental Funds in each State. Retention in the Developmental Funds in
each State must be made in 5 percent increments. The three Developmental Funds'
retention percentages may differ within a State. The net book premium and
associated liability for ultimate net losses not retained by the Company within the
Developmental Fund for each State will be ceded to FCIC.

Commercial Funds
a.

Any eligible crop insurance contracts designated by the Company to the Commercial
Fund, or not designated by the Company to the Assigned Risk Fund or to a
Developmental Fund, will be placed into one of three Commercial Funds as follows:

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Fund C
Fund R
Fund B
b.

CAT;
Revenue insurance plans; or
All other crop insurance plans.

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 in each State. Retention in the Commercial Funds in each
State must be made in 5 percent increments. The three Commercial Funds' retention
percentages may differ within a State. The net book premium and associated liability
for ultimate net losses not retained by the Company within the Commercial Fund for
each State will be ceded to FCIC.

Company Minimum Retention
a.

After all reinsurance cessions under paragraphs 3., 4., and 5., the Company must
retain a percentage of net book premium and associated liability that equals or
exceeds 35 percent of its book of business.

In the event that the Company fails to retain the required minimum percentage of net
book premium and associated liability under this Agreement, the Company retention
of net book premium and associated liability for ultimate net losses for all eligible
crop insurance contracts designated in the Assigned Risk Fund in all States will be
increased on a pro rata basis to make the Company’s retention meet the requirement
for minimum retention stated in subparagraph a.

Underwriting Loss
a.

After cessions under paragraph 6., the amount of underwriting loss retained by the
Company will be calculated separately for each Fund within each State as follows:
i. When the loss ratio exceeds 100 percent but is less than or equal to 160 percent of
the Company’s retained net book premium, the Company will retain the following
percentage of the underwriting loss:
(B)
I. Commercial Fund
50.0 percent
II. Developmental Fund 25.0 percent
III. Assigned Risk Fund 5.0 percent

(R)
57.0 percent
30.0 percent
---

ii. In addition to the amount determined under clause i., when the loss ratio exceeds
160 percent but is less than or equal to 220 percent of the Company’s retained net
book premium, the Company will retain the following percentage of the
underwriting loss:

Commercial Fund

(B)
40.0 percent

(R)
43.0 percent

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II. Developmental Fund 20.0 percent
III. Assigned Risk Fund 4.0 percent

20.0 percent
---

22.5 percent
---

iii. In addition to the amounts determined under clauses i. and ii., when the loss ratio
exceeds 220 percent but is less than or equal to 500 percent of the Company’s
retained net book premium, the Company will retain the following percentage of
the underwriting loss:
(B)
I. Commercial Fund
17.0 percent
II. Developmental Fund 11.0 percent
III. Assigned Risk Fund 2.0 percent

(R)
17.0 percent
11.0 percent
---

iv. FCIC will assume 100 percent of the underwriting loss amount by which the
Company’s loss ratio exceeds 500 percent.
8.

Underwriting Gain
a.

After cessions under paragraph 6., the amount of underwriting gain retained by the
Company will be calculated separately for each Fund within each State as follows:
i. When the loss ratio equals or exceeds 65 percent but is less than 100 percent of
the Company’s retained net book premium, the Company will retain the following
percentage of the underwriting gain:

I. Commercial Fund
II. Developmental Fund
III. Assigned Risk Fund

(B)
94.0 percent
60.0 percent
15.0 percent

(R)
94.0 percent
60.0 percent
---

ii. In addition to the amount determined under clause i., when the loss ratio equals or
exceeds 50 percent but is less than 65 percent of the Company’s retained net book
premium, the Company will retain the following percentages of the underwriting
gain:

I. Commercial Fund
II. Developmental Fund
III. Assigned Risk Fund

(B)
70.0 percent
50.0 percent
9.0 percent

(R)
70.0 percent
50.0 percent
---

iii. In addition to the amounts of underwriting gain determined under clauses i. and
ii., when the loss ratio is less than 50 percent of the Company’s retained net book
premium, the Company will retain the following percentages of the underwriting
gain:

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I. Commercial Fund
II. Developmental Fund
III. Assigned Risk Fund

(B)
11.0 percent
6.0 percent
2.0 percent

(R)
11.0 percent
6.0 percent
---

The underwriting gain or loss for each individual Fund within each State will be totaled to
determine the net underwriting gain or loss for that State.

10.

The Company’s cumulative underwriting gain or loss will be determined by totaling the net
underwriting gains or losses for all States.

11.

Retained Net Book Quota Share
a.

The Company shall cede to FCIC 5 percent of its cumulative underwriting gain or
loss calculated in paragraph 10. and the associated premium and losses with such
amount.

After the cession in subparagraph a.:
i

Any underwriting gain due the Company will be paid by FCIC to the Company at
annual settlement.

ii. Any underwriting loss of the Company will be paid to FCIC on each monthly
settlement report for which there is an underwriting loss.
12.

13.

Contingency Fund
a.

The Contingency Fund, which is part of the insurance fund authorized under section
516(c) of the Act (7 U.S.C. 1516(c)), is used to offset expenses incurred by FCIC to
administer an AIP’s book of business in the event of AIP supervision, rehabilitation,
insolvency or operational deficiency, or an equivalent event, as determined by FCIC,
or the Agreement is terminated for cause.

Any amounts owed to FCIC by the Company in accordance with sections II.B.14.,
IV.B.8., IV.H., and IV.J.4. will be accounted for in the Contingency Fund.

The Company may reinsure commercially its liability for ultimate net losses remaining
after all cessions under this Agreement. The Company must inform FCIC of all
commercial reinsurance purchased that relates to eligible crop insurance contracts.
Commercial reinsurance required to meet the Company’s obligations under this
Agreement, unless otherwise specified by FCIC in writing, must meet the definition of, and
the standards applicable to:
a.

Reinsurance in the National Association of Insurance Commissioners (NAIC) Credit
for Reinsurance Model law, or a NAIC model successor law;

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14.

15.

Standards for reinsurance under the NAIC Accounting Practices and Procedures
Manual including any revisions or updates; and

Any other relevant standards developed by the NAIC for credit for reinsurance.

In addition to other remedies provided in this Agreement, FCIC may, at its sole discretion,
offer additional reinsurance beyond what is otherwise provided in this Agreement as
follows:
a.

Whenever the Company reports an amount of net book premium greater than FCIC
authorized as the maximum reinsurable net book premium, FCIC may cause the net
underwriting gain or loss for all States as defined in paragraph 10. 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.

The reinsurance premium collected pursuant to this paragraph shall be deposited into
the Contingency Fund.

With respect to funds currently contained in the reinsurance account, such amounts will be
paid to the Company in accordance with section II.D.4.e.ii. of the Standard Reinsurance
Agreement in effect for the 2004 reinsurance year.

SECTION III. SUBSIDIES, EXPENSES, FEES, AND PAYMENTS
A.

Subsidies and Expenses
1.

Risk subsidy shall be determined in accordance with the Act and will be provided on behalf
of policyholders to the Company on the monthly settlement report.

A & O Subsidy
Notwithstanding the provisions of this section, under no circumstances will A&O subsidy
be paid in excess of the amount authorized by statute.
a.

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 settlement report, beginning
with the October monthly settlement report for the reinsurance year, after the
Company submits, and FCIC accepts, the information needed to accurately establish
the premium for such eligible crop insurance contracts.
i.

For any CAT eligible crop insurance contract, zero percent of net book
premium.

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ii.

For additional coverage eligible crop insurance contracts that provide coverage
under a Group Risk Plan, or similar type of insurance plan:
I.

For the 2005 reinsurance year 22.6 percent, and for the 2006 and
subsequent reinsurance years 22.4 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
75 percent or below;

II.

For the 2005 reinsurance year 21.4 percent, and for the 2006 and
subsequent reinsurance years 20.1 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
80 percent; and

III. For the 2005 reinsurance year 21.1 percent, and for the 2006 and
subsequent reinsurance years 19.4 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
85 percent or higher.
iii.

For additional coverage eligible crop insurance contracts that provide coverage
under a revenue plan of insurance that can increase liability whenever the
market price at the time of harvest exceeds the market price at the time of
planting:
I.

For the 2005 reinsurance year 21.0 percent, and for the 2006 and
subsequent reinsurance years 20.8 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
75 percent or below; and

II.

For the 2005 reinsurance year 19.9 percent, and for the 2006 and
subsequent reinsurance years 18.7 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
80 percent; and

III. For the 2005 reinsurance year 19.6, and for the 2006 and subsequent
reinsurance years 18.1 percent, percent of the net book premium attributed
to such eligible crop insurance contracts with coverage levels at 85 percent
or higher.
iv.

For all other eligible crop insurance contracts:
I.

For the 2005 reinsurance year 24.4, and for the 2006 and subsequent
reinsurance years 24.2 percent, percent of the net book premium attributed
to such eligible crop insurance contracts with coverage levels at 75 percent
or below;

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II.

For the 2005 reinsurance year 23.1, and for the 2006 and subsequent
reinsurance years 21.7 percent, percent of the net book premium attributed
to such eligible crop insurance contracts with coverage levels at 80
percent; and

III. For the 2005 reinsurance year 22.8 percent, and for the 2006 and
subsequent reinsurance years 21.0 percent, of the net book premium
attributed to such eligible crop insurance contracts with coverage levels at
85 percent or higher.

In addition to other provisions of this Agreement, 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 involves expenses that vary significantly from the
basis used to determine the A&O subsidy under this section.

The SSNs of all agents and loss adjusters, as applicable, who perform any service or
related activity under an eligible crop insurance contract, must be provided to FCIC in
accordance with procedures. If the applicable SSN is not provided for an eligible
crop insurance contract, the Company will not receive any reinsurance for that
eligible crop insurance contract until the appropriate SSN is provided.

A&O subsidy will be paid to the Company based on accepted data obtained from
acreage reports, or such other similar reports (e.g., preliminary tonnage report for
eligible raisin crop insurance contracts, or inventory value reports for nursery and
clam crop insurance contracts, annual farm report for eligible AGR crop insurance
contracts).

CAT Loss Adjustment Expense
FCIC will pay to the Company an amount equal to, for the 2005 reinsurance year 7.5
percent and for the 2006 and subsequent reinsurance years 7.0 percent, of the net book
premium for CAT eligible crop insurance contracts in accordance with procedures for loss
adjustment expenses.

Administrative Fees
The Company shall remit to FCIC all administrative fees collected in accordance with the
applicable eligible crop insurance contract and the following:
1.

In the event the policyholder is a limited resource farmer as defined in the regulations, the
Company shall submit the required information to FCIC and FCIC shall waive the
applicable fees on the monthly settlement report.

If the Company terminates the eligible crop insurance contract due to the non-payment of
administrative fees and reports such to FCIC in accordance with procedures, FCIC will
perform debt collection activities for CAT administrative fees that are due from such
ineligible policyholder.
17

FINAL with technical corrections incorporated

Payments
1.

All payments due FCIC from the Company will be netted on the monthly and annual
settlement reports with amounts due the Company from FCIC. FCIC will remit amounts
due the Company by electronic funds transfer (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 IV.C., with such interest accruing from the date
such payment was due to the date of payment.

In the event that FCIC erroneously rejects data that was correctly submitted by the
Company and a payment would be due to the Company if the data had not been rejected,
the Company shall be entitled to interest accrued on this amount for the period of such
delay, at the rate provided in section IV.C.1.

Any funds paid by the Company to FCIC in the compromise and settlement of any dispute
between FCIC and the Company in an amount less than FCIC claimed was due will be
included on the monthly settlement report without regard to the provisions of sections II.B.

Notwithstanding any other provision of this Agreement, if a review or examination reveals
that the Company or its affiliates have committed an error or omission or failed to comply
with a term of the Act, this Agreement, regulations, or procedures, FCIC must provide
written notice to the Company within 3 years of the end of the insurance period when the
error, omission or failure occurred, if the Company may owe a debt to FCIC, unless the
error, omission or failure was willful or intentional. The failure to provide timely notice
required herein shall only relieve the Company from liability for the alleged debt owed and
not for other consequences of the error, omission or failure that address other obligations of
the Company, including maintaining a satisfactory performance record. Written notice to
the Company under this paragraph must:

Describe the failure regarding compliance with a specified term of the Act, this
Agreement, the regulations, or procedures;

State that such failure may result in an amount being owed to FCIC;

Include the crop year and eligible crop insurance contract number(s) for which such
failure occurred; and

Provide sufficient detail to put the Company on general notice of the type of error,
omission or failure alleged (such as failure to properly calculate the approved yield or
failure to conduct a pre-acceptance inspection, etc.).

The Company must provide written notice, in a form similar to the notice in paragraph 4.,
to FCIC of any claim that funds may be owed from FCIC to the Company within 3 years
after annual settlement of the reinsurance year in which such funds are claimed to be owed.
Failure to provide such notice shall relieve FCIC of the obligation to repay any amount that

FINAL with technical corrections incorporated
would be owed to the Company. If an investigation by FCIC determines that funds may be
owed by FCIC to the Company, written notice does not need to be provided.
SECTION IV. GENERAL PROVISIONS
A.

Collection of Information and Data
1.

The Company is required to collect and provide to FCIC all SSNs or EINs that are required
to be submitted by the policyholder under the eligible crop insurance contract.

Neither the Company, nor its personnel, or contractors, or affiliates may disclose to the
public any information provided by the policyholder unless such disclosure is authorized
by Federal law.

Reports
1.

The Company is required to collect, maintain and submit to FCIC data that FCIC
reasonably determines is necessary to the operation of the Federal crop insurance program.
Data the Company is required to submit to FCIC must be accurate, detailed and submitted
to FCIC in accordance with procedures.

Unless specifically approved by FCIC in writing, FCIC will reject any eligible crop
insurance contract originally submitted by the Company after the cutoff date for the first
annual settlement.

The Company is limited to submitting data through automated systems for 3 years
following the first annual settlement for the reinsurance year. Any other data must be
submitted in accordance with Appendix III. Settlement of claims still in litigation,
arbitration, or any administrative proceeding more than 3 years after the first annual
settlement for such reinsurance year must be reported to FCIC and will be processed
manually following the resolution of such action.

All reports submitted for reimbursement of any funds payable by FCIC under this
Agreement must be certified by an authorized officer or authorized employee of the
Company that the information in the report is correct and accurate.

Producer premiums and administrative fees collected by the Company must be reported to
FCIC in accordance with Appendix III.

The Company will report to FCIC information relating to an eligible crop insurance
contract of the Company reinsured under this Agreement that may be requested by FCIC.

Unless otherwise specified in Appendix III, in addition to any other reporting, the
Company must report the following information regarding each eligible crop insurance
contract and have such information be accepted by FCIC not later than the transaction
cutoff date for the week including the 30th calendar day after the sales closing date for the

FINAL with technical corrections incorporated
eligible crop insurance contract (In cases of written agreements requiring annual FCIC
approval or for the initial year of a written agreement [excluding written agreements
specified in Appendix III], not later than the transaction cutoff date for the week containing
the 30th calendar day after FCIC approval; and for any renewal or multi-year written
agreement, the transaction cutoff date for the week containing the 30th calendar day after
the sales closing date for the eligible crop insurance contract; and for any agricultural
commodity without a fixed sales closing date: 1) for the initial year of application, the later
of the transaction cutoff date for the week containing the 30th calendar day after the
eligible producers signature date, or the transaction cutoff date for the week containing the
30th calendar day after the cancellation date; and 2) for any subsequent year of insurance,
the transaction cutoff date for the week containing the 30th calendar day after the
cancellation date):

The name and all SSNs or EINs the policyholder is required to report under the
eligible crop insurance contract;

The agricultural commodity to be insured under the eligible crop insurance contract;
and

The plan of insurance and coverage level, including the price election, elected by the
eligible producer.

The A&O subsidy applicable to the eligible crop insurance contract under section III.A.2.
will be reduced whenever the information required by paragraph 7. has not been timely and
accurately provided to FCIC or such information is revised after the deadlines set forth in
paragraph 7 .
a.

The A&O subsidy will be reduced by:
i.

1 percentage point if the required information is first accepted or revised after the
transaction cut-off date for the week containing the 30th calendar day after the
sales closing date, but prior to the transaction cut-off date for the week containing
the 60th calendar day; or

ii.

3 percentage points if the required information is first accepted or revised after the
transaction cut-off date for the week containing the 60th calendar day after the
sales closing date, but prior to the transaction cut-off date for the week containing
the 90th calendar day; or

iii.

6 percentage points if the required information is first accepted or revised after the
transaction cut-off date for the week containing the 90th calendar day after the
sales closing date.

The sanctions under this paragraph may be reduced or waived if the delay is caused in
whole or in part by FCIC.

FINAL with technical corrections incorporated
c.

Any amount collected under this paragraph will be placed in the Contingency Fund.

Unless otherwise permitted by FCIC in Appendix III, the Company may not submit
estimated data for the purpose of establishing premium, liability, or indemnity.

10.

The Summary of Coverage and billing statement provided to the policyholder shall
prominently display each of the following:

11.

The total premium calculated by adding subparagraphs b. and c. below;

The risk subsidy and A&O subsidy paid by FCIC to the Company on behalf of the
policyholder; and

The amount of premium and any administrative fees due the Company from the
policyholder.

The Company must immediately report to FCIC any material change in its, or its service
providers’, financial or operational condition that may affect the Company’s ability to
perform its obligations under this Agreement.

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.).

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.

The Company will repay with interest any amount paid to the Company by FCIC that FCIC
or the Company subsequently determines was not due.

FCIC will repay with interest any amount paid by the Company to FCIC, which FCIC
subsequently determines was not due.

Interest on amounts determined not to be due will begin to accrue on the 31st day after the
date that:
a.

In the case of amounts owed to the Company, a written notification stating the
amount claimed to be owed is provided to FCIC by the Company, as applicable, and
end on the date the amount is paid in full; or

In the case of amounts owed to FCIC, the Company receives a final determination
from FCIC or other written statement from FCIC that a specific amount is owed, as
applicable, and end on the date the overpaid amount is paid in full. Appeal by the

FINAL with technical corrections incorporated
Company under this Agreement or 7 C.F.R. 400.169 does not delay the date by which
interest starts to accrue.
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 indemnities, prevented planting payments or
replant payments to policyholders by the Company. The Company's bank must pledge
collateral as required by 31 C.F.R. 202 in the amount determined by FCIC.

When an escrow account has been established, the Company may request FCIC to fund the
escrow account after the Company has drafted the check to pay the indemnity, prevented
planting payment or replant payment to a policyholder. A request to fund the escrow
account shall contain the name and SSN or EIN, as applicable, of the policyholder, the
check number and date payment was made, and the amount of each indemnity, prevented
planting payment or replant payment. A request submitted to FCIC shall be deemed
certified by an authorized officer or authorized employee of the Company that the
information is correct and accurate.

Any Company that elects not to utilize escrow funding will be reimbursed for paid losses
validated and accepted on the monthly settlement report.

The Company’s bank may draw funds from the escrow account when the instrument or
document issued as payment of the indemnity, prevented planting payment or replant
payment has cleared the Company’s bank account.

If there is a shortfall of funds in the escrow account, it is the Company’s responsibility to
deposit funds to cover any shortages.

Supplemental Insurance
1.

The Company shall not sell a contract of insurance or similar instrument, which is written
in conjunction with an eligible crop insurance contract and not reinsured by FCIC, unless
it has complied with the requirements of 7 C.F.R. 400.713.

FCIC will not provide reinsurance for an eligible crop insurance contract if the Company
sold a contract or instrument described in paragraph 1. 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 such insurance or instrument in a manner
inconsistent with its submission and FCIC’s approval.

The Company must maintain, and make available at the request of FCIC, the underwriting
information pertaining to a contract or instrument described in paragraph 1., including the
policy number and all SSNs and EINs related to the eligible crop insurance contract.

FINAL with technical corrections incorporated
4.

If the terms of a contract or instrument described in paragraph 1. become inconsistent with
the terms of the eligible crop insurance contract causing payments to be made under the
eligible crop insurance contract that would not otherwise be payable, reinsurance will be
denied.
Insurance Operations

General
a.

The Company must verify yields and other information used to establish insurance
guarantees and indemnity payments in accordance with the regulations and
procedures.

The Company must use contracts, standards, procedures, methods, and instructions as
authorized by FCIC in the sale and service of eligible crop insurance contracts.

The Company must comply with standards and procedures to create forms used in the
sales and service of any eligible crop insurance contract.

Plan of Operations
a.

The Company’s complete Plan of Operations must be submitted to FCIC by April 1
preceding the reinsurance year, unless otherwise authorized by FCIC. The Plan of
Operations must meet the requirements of this Agreement, including the format and
all requirements specified in Appendix II, to be considered a complete Plan of
Operations.

Once approved by FCIC, the Company’s Plan of Operations becomes an Appendix to
the Agreement.

If the Plan of Operations is not approved by FCIC by the July 1 start of the
reinsurance year:
i.

FCIC may, at its sole discretion, agree to continue to reinsure and pay A&O and
risk subsidies for eligible crop insurance contracts that are renewed or sold by or
on behalf of the Company while FCIC continues its evaluation of the Plan of
Operations.

ii.

FCIC will provide the Company with written notice of its decision to continue
to reinsure eligible crop insurance contracts that are renewed or sold by or on
behalf of the Company while FCIC continues its evaluation of the Plan of
Operations or its decision that the Company and any of its service providers and
agents must cease the renewal or sale of eligible crop insurance contracts until
FCIC determines whether to approve or disapprove the Plan of Operations.

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iii.

Any eligible crop insurance contract sold or renewed after FCIC has provided
written notice that the Company must cease the renewal or sale of eligible crop
insurance contracts until FCIC determines whether to approve or disapprove the
Plan of Operations will not be reinsured.

iv.

If FCIC authorizes the continued renewal or sale of eligible crop insurance
contracts by or on behalf of the Company while FCIC completes its evaluation
of the Plan of Operations and approves the Plan of Operations, the renewed and
sold eligible crop insurance contracts will be reinsured under the newly
approved Plan of Operations.

If FCIC authorizes the continued renewal or sale of eligible crop insurance
contracts by or on behalf of the Company while FCIC completes its evaluation
of the Plan of Operations and disapproves the Plan of Operations, the eligible
crop insurance contracts renewed or sold during the evaluation period will be
transferred to FCIC and may be processed in accordance with subsection O.1.e.
and f.

The Company must provide immediate written notice to FCIC if a change in business
organization, operations, finances or the sales expectations of the Company, or its
service providers, would have a material impact on the Company’s ability to perform
under the Agreement is likely to occur.

If a change in business organization, operations, finances or the sales expectations of
the Company or its service providers occurs that would have a material impact on the
Company’s performance under the Agreement, whether FCIC learns of the change by
notice from the Company or otherwise:
i.

FCIC may require the Company to amend its Plan of Operations; or

ii.

The Company may submit to FCIC in writing a request to amend the Plan of
Operations.
I.

The request must be approved by FCIC in writing before the amended
Plan of Operations can become a part of this Agreement.

II.

The request will be evaluated in accordance with the review procedures
applicable to the original Plan of Operations, except that FCIC will also
consider whether FCIC’s risk is materially increased.

III. FCIC will not approve a request to amend the Plan of Operations if such
amendment would materially increase the risk of loss to FCIC unless
FCIC, at its sole discretion, determines that the amendment arises from an
action of FCIC or U.S. Department of Agriculture that substantially
increases the risk of underwriting loss on eligible crop insurance contracts
written by the Company.

FINAL with technical corrections incorporated

IV. Changes to eligible crop insurance contracts made in accordance with the
terms of such contract are not a basis for an amendment to the Plan of
Operations.

The Company shall be in compliance with the Freedom to E-File Act and section 508
of the Rehabilitation Act. The Company must file its plan for meeting the
requirement of these statutory provisions, in accordance with procedures, with the
Plan of Operations.

The Company shall disclose in the Plan of Operations all of its commercial
reinsurance related to this Agreement and provide documentation regarding such
reinsurance as required by FCIC. If during the reinsurance year the Company adds or
modifies its commercial reinsurance, it shall immediately notify FCIC in accordance
with procedures.

The Company shall list in the Plan of Operations all PIC’s.

Compliance with State Insurance Laws
a.

Unless preempted in accordance with the Act or subsection P., the Company and its
affiliates shall comply with applicable State law.

If a State Insurance Department determines that the Company or any of its affiliates
are in non-compliance with an applicable State law and FCIC determines that the
non-compliance materially affects the Company’s ability to meet its obligations under
this Agreement, such non-compliance shall be considered a breach of this Agreement,
unless remedial action by the Company or affiliate to correct the non-compliance is
approved by FCIC.

Upon the request of FCIC, the Company shall submit to FCIC information or
documentation the Company is required to submit to the State Insurance Department
under an applicable State law related to the business conducted under this Agreement.

If a State Insurance Department notifies the Company or its affiliates that it is taking,
or proposes to take, an action against the Company or its affiliates or directs the
Company to take an action, the Company must immediately notify FCIC of such
action and any remedial action proposed to be taken by the Company or directed by
the State Insurance Department that directly or indirectly affects the Company’s
ability to perform its obligations under this Agreement.

Conflict of Interest
a.

The Company and its service providers shall not permit their sales agents, agency
employees, sales supervisors, or any relative of its sales agent, agency employee or
sales supervisor, to be involved in loss adjustment activities in a county or adjoining

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county where the sales agent, agency employee or sales supervisor performs sales
functions (except receipt and transfer to the Company of a notice of loss), including
the following:
i.

The supervision, control, or adjustment of a claim;

ii.

Obtaining sales or production records for the purposes of loss adjustment on
behalf of the policyholder (other than simply collecting information directly
from the policyholder and providing it to the Company);

iii.

A loss adjustment determination or verification required to complete a claim or
the determination or verification of a cause of loss;

iv.

Verification of yields for the purpose of validating insurance coverage or the
guarantee;

After a notice of loss is filed by the policyholder, advising or assisting the
policyholder in any manner regarding the preparation of the claim and the
determination of the indemnity, including, but not limited to, whether the loss
adjuster correctly applied loss adjustment procedures; or

vi.

Any other function reserved for loss adjusters in the procedures.

The Company and its service providers shall not permit any person, or any relative of
such person, involved in the loss adjustment determination or verification required to
complete a claim or the determination or verification of a cause of loss, to be involved
with the sales, solicitation or brokering of an eligible crop insurance contract or with
any other function reserved for the agent in the procedures approved by FCIC in a
county or adjoining county where the claims supervisor, employee or contractor
performs claims functions.

If the Company elects to allow the same loss adjuster to work claims on which an
indemnity was paid for more than two consecutive years for the same policyholder,
the Company shall be required to review claims identified by FCIC as required in
Appendix IV.

The Company and its service providers shall not permit any person involved in the
loss adjustment determination or verification required to complete a claim, or the
determination or verification of a cause of loss, to adjust a loss for:
i.

A policyholder with whom they have a business, financial or legal relationship
(Business, financial and legal interests include but are not limited to lending
money, custom farming, leasing land or other property, selling other goods or
services besides insurance, or activities of a similar nature. The sale and
purchase of crop insurance does not constitute a business, financial or legal
relationship with the policyholder that must be reported);

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ii.

A policyholder, or a person with a substantial beneficial interest in the
policyholder, whose eligible crop insurance contract was sold by a relative of
the person; or

iii.

A relative of the person.

The Company and its service providers shall not permit their sales agents, the owners
or employees of their sales agencies, their sales supervisors, or any relative to be
involved in the acceptance and verification of underwriting data relating to eligibility
and coverage for an eligible crop insurance contract written by such person.

A person employed by the Company or its service provider for the general supervision
of the sales and service of eligible crop insurance contracts may supervise those
activities associated with the general administration of such contracts, which may
include the management of training, servicing, underwriting, and loss adjusting.

Consistent with subparagraphs a. through f., all quality control reviews must be
conducted by objective and unbiased persons who were not involved in establishing
the guarantee, sales, adjusting the loss, or the direct supervision of sales or loss
adjustment activities for the eligible crop insurance contracts reviewed.

The Company must notify all of its employees and affiliates, including agents,
agencies, and loss adjusters, in writing of the duty to disclose to the Company and in
turn FCIC any business, financial, legal or familial relationship with a policyholder,
or a person with a substantial interest in the policyholder, in accordance with
Appendix IV. In addition to any other sanctions in this Agreement, if the Company
fails to follow the provisions of this subparagraph and Appendix IV, eligible crop
insurance contracts sold or serviced by the person who failed to disclose business,
financial, legal or familial relationship with a policyholder may not, at FCIC’s
discretion, be reinsured or receive A&O or risk subsidies for the reinsurance year for
which such disclosure was not provided.

The Company shall notify FCIC within 3 business days when it discovers that a
Company employee or affiliate of the Company has violated the requirements of this
paragraph.

Access to Records and Operations
1.

Upon written request, unless otherwise authorized by the FCIC Manager, the Company
must provide FCIC reasonable access to its offices, personnel, and all records that pertain
to the business conducted under, or the requirements contained in, 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.

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The Company shall enter into, and enforce agreements to ensure that its affiliates provide
FCIC and the Company with access to its affiliates’ offices, personnel, and all records that
pertain to the business conducted under, or the requirements contained in, 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 such affiliate.

The Company must designate in its Plan of Operations where the records pertaining to the
business conducted under this Agreement are located.

Records described in this subsection must be retained until 3 years after the annual
settlement date for the applicable reinsurance year or until 3 years after the end of the
insurance period of the specific eligible crop insurance contract, whichever is later.

FCIC may require the Company and its affiliates to retain certain specified records for a
longer period than in paragraph 4. if it so notifies the Company in writing at any time
before the expiration of the applicable 3-year period. If the applicable 3-year period has
expired and the Company or its affiliate still has the records in their possession, FCIC can
require that such records be retained for a longer period by providing written notice.

Notwithstanding paragraph 4., records regarding an unsatisfied debt of a policyholder must
be retained for 7 years after establishment of the debt unless the debt is satisfied or is
discharged through bankruptcy proceedings.

For the purpose of this subsection 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.

Compliance and Corrective Action
1.

The Company and its affiliates must comply with the provisions of this Agreement, as
applicable. The Company is solely responsible for the conduct and performance of its
personnel and affiliates with respect to the obligations imposed by this Agreement and the
procedures. Liability for damages incurred, to the extent it is caused by an error or
omission or failure to comply with this Agreement or the procedures, is the sole
responsibility of the Company. The assumption of liability under this section is only for
the purpose of this Agreement and may not be relied upon by any person or entity not a
part to this Agreement for any purpose.

In addition to paragraph 1., the Company and its affiliates must comply with the
procedures, and the applicable laws of the States in which the Company is conducting
business under this Agreement, unless preempted in accordance with section IV.P.

The Company must fully cooperate with FCIC in the review or examination of the
Company or its affiliates regarding compliance with the requirements of the Agreement
and procedures. The Company will include in its agreements with its affiliates provisions

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that ensure that such affiliates agree to cooperate and assist FCIC in the reviews and
examinations conducted in accordance with this Agreement.
4.

In addition to any other remedies available under this Agreement, if FCIC finds that the
Company has not complied with a provision of this Agreement, and the Company has not
taken appropriate steps to correct the reported act of non-compliance, FCIC may, at its sole
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.

If a State makes a determination that the Company or its affiliates are not in compliance
with state law and FCIC determines such non-compliance is material to the Company’s
obligations under this Agreement, and all appeals have been exhausted, FCIC may take
remedial actions, which may include suspension or termination of this Agreement in
accordance with subsections I. and J., denial of reinsurance, in whole or in part, depending
on the materiality or severity of the non-compliance.

In addition to any other remedies in this Agreement, if FCIC determines that the Company
or its affiliate willfully violated the Agreement or the procedures, FCIC reserves the right
to deny reinsurance for any insurance contract that is sold or serviced in violation of the
terms of this Agreement or procedures.

Whenever a failure to substantially comply with a provision of this Agreement or
procedures by the Company or its service providers, agents, and loss adjusters materially
affects the existence or amount of the indemnity, prevented planting payment or replant
payment or premium for an eligible crop insurance contract (including but not limited to
incorrect APH calculations; improper adjustment of losses; 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 or unit
division) and FCIC is:
a.

Able to determine the correct amount of indemnity, prevented planting payment or
replant payment or premium, FCIC, except as provided in paragraph 8.d, may deny
A&O subsidy and risk subsidy or reduce the A&O subsidy for the eligible crop
insurance contract based on the severity of the failure, and require the Company:
i.

To report to FCIC through DAS the correct amount of indemnity, prevented
planting payment, replant payment and premium;

ii.

To pay to the policyholder any amount of underpaid indemnity, prevented
planting payment, replant payment or overpaid premium; and

iii.

To pay to FCIC any overpaid indemnity, prevented planting payment, replant
payment or underpaid premium and any subsidy that exceeds the amount the
Company or policyholder was entitled to receive.

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b.

Unable to determine the correct amount of indemnity, prevented planting payment,
replant payment or premium that should have been paid, FCIC will deny reinsurance,
in whole or in part, based on the severity of the failure, unless the Company can
provide documentary evidence satisfactory to FCIC that shows the correct amount of
the indemnity, prevented planting payment, replant payment or premium.

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 or its service providers, agents, and loss adjusters to provide
services or to comply with a provision of this Agreement or procedures, and that the value
of such service or failure to comply is difficult to determine because the damages are
uncertain and the amount of service or failure to comply is difficult to quantify. FCIC and
the Company agree that in view of the difficulty of determining the value of such service,
the amounts stated below are reasonable estimates of the value. In the event there is a
pattern or practice of failing to comply with the Agreement or procedures and FCIC has
determined the Company or its service providers, agents, and loss adjusters has failed to
provide services or to comply with a provision of this Agreement or procedures and such
failure has occurred:
a.

During the claims process (such as loss adjustment, quality control reviews,
verification of applicable information, etc.), the Company agrees to pay FCIC an
amount up to 5 percent of the net book premium on all crop insurance contracts
affected by the failure based on the materiality or severity of the failure;

During the sales and service of the crop insurance contract, excluding the claims
process contained in subparagraph a., the Company agrees to pay FCIC an amount
up to 15 percent of the net book premium on all crop insurance contracts affected by
the failure based on the materiality or severity of the failure;

FCIC may impose the remedies in both subparagraphs a. and b., if applicable
(However, both remedies may not be imposed for the same conduct by the same
person); and

If a pattern or practice under this paragraph also involves overpaid indemnities that
may be collected under paragraph 7.a., any reduction in A&O subsidies will be
imposed under this paragraph, not paragraph 7.a.

Failure of the Company or its affiliates to cease or desist any activity or to take a specific
action, as required by FCIC in writing, will subject the Company or its affiliates to the
sanctions in section 515(h) of the Act (7 U.S.C. 1515(h)).

10.

Any payment due from, or paid by, the Company under this subsection shall be in addition,
and without prejudice, to any other rights of FCIC, or the United States. FCIC may, at its
sole discretion, waive, reduce or delay repayment.

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11.

Failure of the Company to make payment in accordance with the provisions of this
Agreement, or with provisions of any separate written agreement to make such payment
between the Company and FCIC, may subject the Company to the remedies available
under this Agreement.

12. Nothing in this subsection prevents FCIC from suspending or terminating this Agreement
in accordance with subsections I. or J.
13.

Any A&O subsidies collected under this subsection will be placed in the Contingency
Fund.

Suspension
In addition to the other remedies available in this Agreement, FCIC may suspend this Agreement
for cause due to a material breach or failure to perform or comply with obligations under this
Agreement. If this Agreement is suspended for cause:
1.

Except as provided in paragraph 3., the suspension will remain in effect until FCIC
determines that the error or omission has been corrected and that steps have been taken to
prevent its occurrence.

While suspended, the Company shall not sell, or authorize to be sold, any new crop
insurance contracts or may not renew, or authorize the renewal of, existing eligible crop
insurance contracts, as determined by FCIC, under this Agreement. However, if required
by FCIC, the servicing of all eligible crop insurance contracts in effect at the time of the
suspension is to continue, A&O subsidy will continue to be paid for those eligible crop
insurance contracts that FCIC requires to be serviced.

If the eligible crop insurance contracts are not serviced as required by paragraph 2., or
errors or omissions are not corrected within the timeframe specified by FCIC, the
suspension will remain in effect and this Agreement will automatically terminate at the end
of the reinsurance year, or an earlier date if notice of termination is provided by FCIC.

Notwithstanding any other provision of this Agreement, during the period of suspension,
the Company may submit a request to FCIC for approval by FCIC to not renew some or all
of the existing eligible crop insurance contracts. Each request must contain supporting
documentation stating the basis for the request and the proposed implementation of the
request.

Any eligible crop insurance contract that is sold or renewed if precluded by FCIC, while
this Agreement is suspended will not receive reinsurance, A&O subsidy or risk subsidy for
such eligible crop insurance contracts.

Any eligible crop insurance contract not renewed in accordance with this subsection must
be canceled in accordance with the terms of the eligible crop insurance contract not later
than 15 days before the next applicable cancellation date.

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J.

Termination
1.

Notwithstanding any other provision of this Agreement, FCIC may terminate this
Agreement for cause due to a material failure to perform or comply with this Agreement or
the procedures, or for the convenience of the government.

Termination will be effective on the date specified by FCIC but under no circumstances
will it be after the last day of the reinsurance year.

If this Agreement is terminated, FCIC will not provide reinsurance for eligible crop
insurance contracts issued or renewed after the date of the termination. Except as
otherwise provided in this Agreement, FCIC will provide reinsurance in accordance with
the terms of the Agreement, for eligible crop insurance contracts in effect as of the date of
the termination until the next cancellation date for the eligible crop insurance contract.

In addition to any other reductions provided in the Agreement, if this Agreement is
terminated by FCIC for cause, the Company shall pay FCIC an amount not greater than
10 percent of the net book premium for all eligible crop insurance contracts in its book of
business based on the materiality or severity of the cause. Any amount collected under
this paragraph will be placed in the Contingency Fund.

After termination of this Agreement, unless otherwise specified in this Agreement, all of
the Company’s eligible crop insurance contracts in its book of business must be cancelled
in accordance with the terms of such contract not later than 15 days before the next
applicable cancellation date.

Disputes and Appeals
1.

If the Company disputes an action, finding, or decision of FCIC under this Agreement, the
Company must seek a final administrative decision regarding such action, finding, or
decision in accordance with the provisions of 7 C.F.R. 400.169 before seeking judicial
review.

If the Company seeks a final administrative decision or reconsideration in accordance with
7 C.F.R. 400.169, 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.

Renewal and Mandatory Amendments
1.

This Agreement will renew for subsequent reinsurance years under the same terms and
conditions, unless otherwise amended, by 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.

FINAL with technical corrections incorporated

Except as provided in subsection M., if changes in Federal law are enacted that affect the
rights and obligations of the parties to this Agreement which require revisions to the
Agreement, the Agreement must be revised on or before June 30th to incorporate the
statutory changes and these revisions will be effective beginning with the next reinsurance
year.

Appropriation Contingency
The payment of obligations of FCIC under this Agreement is 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.

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.

Oversight and Cut-Through
1.

Whenever FCIC determines that the Company is unable to substantially fulfill an
obligation that materially affects its performance under this Agreement with respect to
some or all of the eligible crop insurance contracts it has in its book of business, FCIC may
impose one or more of the following on the Company:
a.

Require additional reporting to FCIC of financial or operational information related to
business conducted under the Agreement.

Allow the placement of representatives of FCIC at any location of the Company and
its service providers to monitor activities that directly or indirectly affect the
performance of the Company’s obligations under this Agreement.

Obtain approval of FCIC of some or all decisions or actions (including but not limited
to any transaction, payment, agreement, and servicing of eligible crop insurance
contracts) taken or contemplated by the Company or its service providers that could
directly or indirectly affect the performance of the Company’s obligations under this
Agreement.

Take all reasonable steps to preserve the assets and financial and operating
capabilities of the Company to perform its obligations under this Agreement.

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e.

Transfer to FCIC, or its designee, without further action of the Company, any or all
eligible crop insurance contracts. With respect to any eligible crop insurance contract
transferred to FCIC:
i.

FCIC will assume all obligations for unpaid losses whether occurring before or
after the date of transfer regarding such eligible crop insurance contracts, and
the Company must pay FCIC all funds in possession of the Company and its
affiliates with respect to all such eligible crop insurance contracts transferred
including, but not limited to, premiums collected or any payments from
commercial reinsurers related to the book of business.

ii.

FCIC, or its designee, will have the right to conduct all activities related to the
sale and service of eligible crop insurance contracts.

iii.

FCIC has the right to all uncollected premiums on all eligible crop insurance
contracts.

iv.

Any uncollected debts owed to the Company under an eligible crop insurance
contract will become a debt owed to FCIC.

To the extent that FCIC contracts for an AIP or other entity to service the
transferred eligible crop insurance contracts, the AIP or other entity will receive
A&O subsidy for service the AIP or other entity must perform for such eligible
crop insurance contracts in proportion to the amount of service required for the
remainder of the crop year.

With respect to eligible crop insurance contracts that are transferred to FCIC and
when another AIP agrees to assume the eligible crop insurance contracts:
i.

The AIP will assume the obligations for unpaid losses whether occurring before
or after the date of transfer regarding such eligible crop insurance contracts,
unless otherwise determined by FCIC;

ii.

FCIC will remit to the AIP any premium or any applicable payments from
commercial reinsurers collected from the Company; and

iii.

The AIP will receive A&O subsidy for services the AIP must perform for such
eligible crop insurance contracts in proportion to the amount of service required
for the remainder of the crop year.

A Company in supervision, rehabilitation, liquidation, or any equivalent action by a State,
is presumed to be unable to substantially fulfill obligations that materially affect its
performance under this Agreement with respect to some or all of the eligible crop insurance
contracts it has in its book of business for the purposes of paragraph 1.

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3.

If either paragraph 1.e. or 1.f. is implemented with respect to another AIP, the Company,
within the limits of its financial and operational resources, agrees to cooperate with FCIC
in the transferring and servicing of such eligible crop insurance contracts.

Preemption of State Law
1.

In accordance with section 506(l) of the Act (7 U.S.C. 1506(l)), the provisions of this
Agreement that are inconsistent with provisions of State or local law will supersede such
law to the extent of the inconsistency.

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.

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.

No State or local regulatory authority, including without limitation a State’s insurance
commissioner, department, or comparable public authority, may enforce or seek to enforce
any provision of the Act, the regulations, this Agreement, or any procedures, without the
prior written consent of FCIC.

Supervision, Rehabilitation, and Liquidation
If the Company is placed in supervision, rehabilitation, liquidation, or any equivalent action by
the State Insurance Department:
1.

The Company shall take all reasonable steps to facilitate a working relationship between
FCIC and the State Insurance Department during the period the Company is in supervision,
rehabilitation, liquidation, or any equivalent action.

The Company shall take all reasonable steps to ensure that FCIC has access to information
and use of the operating systems, records, equipment, or other property used in the
administration of the Company’s book of business for as long as necessary to service the
book of business.

In liquidation (or equivalent situation):
a.

If FCIC has expended funds to keep the Company operational, including the payment
of expenses already included in the A&O subsidy, or to pay other expenses not
included in the A&O subsidy, when the Company was in supervision, rehabilitation
liquidation, or any equivalent situation, with respect to the repayment of such funds,
FCIC shall have priority over all other creditors except for expenses of the state
supervisor, rehabilitator, liquidator, or equivalent person; and

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b.

FCIC will have the right to conduct all activities related to the sale and service of eligible
crop insurance contracts.

The Company and its affiliates must pay to FCIC all funds in their possession with respect
to all eligible crop insurance contracts including, but not limited to, premiums collected or
any applicable payments from commercial reinsurers.

Any uncollected debts or premiums owed to the Company under an eligible crop insurance
contract will become a debt owed to FCIC.

The Company and its affiliates shall:

If the Company owes any other funds to FCIC not included in subparagraph a., with
respect to the repayment of such funds, FCIC shall have priority over all other nonfederal creditors.

Properly and fully service all eligible crop insurance contracts until transferred or the
applicable cancellation date, whichever is the later;

Take all reasonable efforts to ensure that the Company’s commercial reinsurance
applicable to its book of business remains in effect; and

Not delay any payment to FCIC or the policyholder related to an eligible crop
insurance contract.

Those persons found not in compliance with paragraph 7.c. shall be subject to debarment
from participating in the programs of FCIC and USDA.

Mediation, Arbitration, Litigation and Assistance
1.

The Company’s expenses incurred as a result of litigation are covered by the A&O subsidy.
FCIC has no obligation to provide other funds to reimburse the Company for litigation
costs.

In accordance with procedures, the Company may request FCIC to provide non-monetary
assistance, including witnesses, documents, and direction or such other assistance for
mediation, arbitration or litigation. FCIC will only consider the Company's request for
assistance if the Company:
a.

Reports the matter in accordance with paragraph 3;

Immediately notifies FCIC in writing of the requested action setting forth the reasons
such action would be in the best interests of FCIC;

Presents all legal arguments favorable to its defense including those suggested by
FCIC; and

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Does not join FCIC as a party to the action unless FCIC agrees in writing to be joined
as a party.

The Company shall report to FCIC in accordance with established procedures, disputes
with policyholders in mediation, arbitration, litigation or legal action, within 30 days after
the Company has been notified of such dispute.

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 Federal crop insurance program.

Unless otherwise provided in this Agreement, FCIC will pay ultimate net losses for eligible
crop insurance contracts of the Company in accordance with the provisions of section II.B.:
a.

In addition to the amount of the claim, ultimate net loss may include interest owed to
policyholders related to the eligible crop insurance contract that is included:
i.

ii.

In a final judgment against the Company by an arbitrator or a court of
competent jurisdiction if FCIC determines that:
I.

Such interest resulted from the Company's substantial compliance with all
applicable procedures in the selling and servicing of the eligible crop
insurance contract; and

II.

The award of such interest did not involve negligence or culpability on the
part of the Company or its affiliates; and

In the settlement of any claim if FCIC, in addition to the determinations
included above, determines that the settlement should be approved.

In all arbitration and mediation cases or any other case that has been settled by the
Company and policyholder:
i.

The Company must provide to FCIC all written statements from the arbitrator
describing the issues in dispute, the factual findings, the determinations and the
amount and basis for any award;

ii.

The Company must provide to FCIC all settlement agreements that contain at a
minimum, a statement of the issues in dispute and the amount of the settlement;

iii.

The Company must provide to FCIC all written opinions of the court, all
pleadings filed in the case, and other documentation requested by FCIC; and

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iv.

Failure of the Company to provide the required information in this subparagraph
for an eligible crop insurance contract will result in denial of reinsurance for
such contract.

Under no circumstance are any punitive or consequential damages, attorney fees or any
other costs, including court costs, included in the calculation of ultimate net loss.

For the purposes of this subsection only, the term “settlement” means the compromise or
resolution of a dispute under an eligible crop insurance contract between the Company and
a policyholder.

Sanctioned persons
The Company and its affiliates shall not use any person who has been debarred or suspended, or
voluntarily excluded under 7 C.F.R. part 3017 by FCIC or any other U.S. Government Agency or
disqualified by FCIC under 7 U.S.C. 1506(n) or 1515(h), as applicable, in any manner which
involves performance under this Agreement. Use of a disqualified, debarred, suspended or
voluntarily excluded person or entity may subject the Company and affiliate to suspension and
debarment in accordance with 7 C.F.R. part 3017.

Member - Delegate
No member of or delegate to Congress nor any resident commissioner will be permitted to have
any share or part of this Agreement or receive 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
member of or delegate to Congress nor any resident commissioner as a result of an interest in a
corporation and the benefit is for the corporation’s general benefit. Members of or delegates to
Congress or any resident commissioner are eligible to purchase a crop insurance contract for any
crop in which they have an insurable interest.

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. The Company shall be in substantial compliance with all applicable
Federal laws prohibiting discrimination.

Set Off
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.

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.

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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.

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 the reinsurance year until such amounts are paid with appropriate interest.

Notwithstanding an assignment made in accordance with section IV.W., FCIC may set off:
a.

Any amount due FCIC under this Agreement;

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 1986 (26 U.S.C. 6323), or any
amendments thereto or modifications thereof, before acknowledgment by FCIC of
receipt of the notice of assignment; and

Any amounts, other than amounts specified in subparagraphs a. and b. 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.

Assignment
1.

No assignment by the Company shall be made of the Agreement, or the rights thereunder,
unless:
a.

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.

Any assignment made under paragraph 1.:
a.

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;

Must cover all amounts payable and not already paid under the Agreement;

Shall not be made to more than one party; and

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d.

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.

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 considered a final administrative determination of FCIC and, therefore,
subject only to review by the Board of Contract Appeals, with respect to 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.

Certification
The undersigned acknowledges that the Company and its Board of Directors, if applicable, 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

File Type	application/pdf
File Title	Microsoft Word - 2005agreement-final 12with technical corrections.doc
Author	craig.witt
File Modified	2005-03-07
File Created	2005-03-07