SRA Appendix II

2021 SRA—Appendix II

07-01-20

APPENDIX II
PLAN OF OPERATIONS
The Plan of Operations (Plan) filed by the Company shall contain the information stated herein
and the Company shall certify the accuracy and completeness of the Plan. Information,
documents, or forms, are to be identified in the Plan as Exhibits to correspond with each section
and paragraph. The Company shall file all Exhibits required herein annually, and, as necessary,
file any addition or revision to specific Exhibits during the reinsurance year. Any Exhibit not
filed when required may delay approval of the Plan. The Company may be required to provide
additional information as may be necessary to clarify or provide further detail in support of the
Company’s or MGA’s financial or operational capacity.

SECTION I. INSURANCE COMPANY GENERAL
(a)

The name, address, phone number, web site address, and tax identification
number of the Company. (Note: If the Company’s Plan is approved, information
from this Exhibit other than tax identification number will be released on RMA’s
public web site.)

(b)

The names, address, and tax identification numbers of all PICs and, upon request,
a copy of agreements between the Company, or its MGA, and PICs.

(c)

If the Company elects to use an MGA:
(1)

The name, phone number, address, web site address, and tax identification
number of the MGA; (Note: If the Company’s Plan is approved,
information from this Exhibit other than tax identification number will be
released on RMA’s public web site.)

(2)

A copy of all agreements between the MGA and the Company that relates
to eligible crop insurance contracts reinsured under this Agreement; and

(3)

A letter from an officer of the Company that empowers the entity
identified in subparagraph (c)(1) to act as the MGA for the Company for
the reinsurance year. The officer must be listed in the Company’s Annual
Statement filed with the State in which the Company is domiciled and
have the authority to act on behalf of the Company.

SECTION II. CERTIFICATIONS
The Company shall provide a certification statement referencing each item in this section, signed
by the person authorized to sign the Agreement on behalf of the Company, unless otherwise
specified.
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(a)

In accordance with section I of Appendix I, the Company shall submit its
certification regarding procurement integrity.

(b)

In accordance with section II of Appendix I, the Company shall submit its
certification regarding a drug free workplace.

(c)

In accordance with section III of Appendix I, the Company shall complete and
submit OMB Form LLL, Disclosure of Lobbying Activities, and specify the
period of time to which such completed form applies.

(d)

In accordance with section IV(p) of the Agreement, the Company shall submit its
certification regarding compliance with discrimination laws.

(e)

The Company shall submit its certification that the Company, its MGA as
applicable, its affiliates, and its PICs are properly licensed under the insurance
laws or regulations of all States in which the Company sells and services eligible
crop insurance contracts reinsured under this Agreement.

(f)

The Company shall submit its certification regarding the Company’s ability to
meet its obligations under the current and any prior Agreement, as applicable.

(g)

The Company shall submit its certification regarding non-disclosure, as specified
in section XV(a)(9) of Appendix I.

(h)

The Company shall submit its certification that the information required by US
Federal Contractor Registration (www.sam.gov) has been provided. This
information will be used to process payments.

SECTION III. FINANCIAL INFORMATION
(a)

Upon specific request by FCIC, the Company shall provide the following:
(1)

The Statutory Annual Statement for the most recent reporting year.

(2)

The Statutory Quarterly Statements for the most recent quarter and
throughout the reinsurance year, within 10 days after such statements are
filed with the State.

(3)

The Statutory Management Discussion and Analysis, within 10 days of
making the filings in subparagraph (c).

(4)

Actuarial Opinion of Reserves for the most recent reporting year, by June
1 preceding the start of the reinsurance year.

(5)

Insurance Regulatory Information System (IRIS) Ratios.
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(6)
(b)

(c)

07-01-20

The Statutory Insurance Expense Exhibit.

The Company shall provide the following:
(1)

If prepared in the normal course of business, annual audited GAAP
financial statements for the previous reporting year, by June 1 preceding
the start of the reinsurance year.

(2)

If prepared in the normal course of business, Quarterly GAAP financial
statements throughout the reinsurance year, within 45 days of the end of
each quarter.

(3)

If prepared in the normal course of business, annual Securities and
Exchange Commission filings (i.e. 10K), if applicable, within 30 days of
making such filings.

(4)

If prepared in the normal course of business, quarterly Securities and
Exchange Commission filings (i.e. 10Q) within the reinsurance year, if
applicable, within 30 days of making such filings.

(5)

Controls or management recommendations received from an independent
auditor regarding the Company, by June 1 preceding the start of the
reinsurance year.

(6)

The most recent State Insurance Department Examination Report, within
30 days of receipt by the Company of such report.

If an MGA is designated, the MGA shall provide the following:
(1)

Annual audited GAAP financial statements for the previous calendar or
fiscal year, as applicable, by June 1 preceding the start of the reinsurance
year.

(2)

Quarterly GAAP financial statements throughout the reinsurance year,
within 45 days of the end of each quarter.

(3)

If prepared in the normal course of business, annual Securities and
Exchange Commission filings (i.e. 10K), within 30 days of making such
filings.

(4)

If prepared in the normal course of business, Quarterly Securities and
Exchange Commission filings (i.e. 10Q) within the reinsurance year,
within 30 days of making such filings.

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(5)

07-01-20

Internal controls or management recommendations received from an
independent auditor regarding the MGA, by June 1 preceding the start of
the reinsurance year.

(d)

The Company shall provide an explanation for any ratio falling outside the
requirements of 7 C.F.R. §§ 400.170-176.

(e)

Upon request the Company shall provide a description of all financial
relationships that pertain to crop insurance business reinsured under this
Agreement.

(f)

The Company shall provide Agent Compensation Reports, itemizing agent
commissions and other agent compensation for eligible crop insurance contracts
reinsured by FCIC as specified in the Agent Compensation Template and
completed for the:

(g)

(h)

(1)

Previous reinsurance year’s actual data certified by a financial officer,
authorized by the Company, as being in compliance with FCIC
procedures;

(2)

Current reinsurance year’s estimated data; and

(3)

Upcoming reinsurance year’s projected data.

The Company shall provide Loss Adjustment Expense Reports, itemizing loss
adjuster expenses for eligible crop insurance contracts reinsured by FCIC, as
specified in the Loss Adjustment Expense Template and completed for the:
(1)

Previous reinsurance year’s actual data certified by a financial officer,
authorized by the Company, as being in compliance with FCIC
procedures;

(2)

Current reinsurance year’s estimated data; and

(3)

Upcoming reinsurance year’s projected data.

The Company shall submit Total Expense Reports, itemizing total expenses for all
eligible crop insurance contracts reinsured by FCIC, prepared according to the
National Association of Insurance Commissioners Annual Statement Instructions,
as specified in the Total Expense Template, and to be completed for the:
(1)

Previous reinsurance year’s actual data certified by a financial officer,
authorized by the Company, as being in compliance with FCIC
procedures;

(2)

Current reinsurance year’s estimated data; and
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(3)
(i)

(j)

07-01-20

Upcoming reinsurance year’s projected data.

Posted reserves for which estimated liability exceeds five percent of policyholder
surplus for:
(1)

All open contingent liabilities; and

(2)

All pending arbitration, mediation, or litigation.

Upon request, the Company, and MGA if applicable, shall provide one or more of
the following:
(1)

Actual and estimated cash flow documentation;

(2)

Copies of all line of credit agreements with financial institutions used to
fund any expenses, including amounts due FCIC; or

(3)

Any other financial information related to the Company or the MGA that
would assist FCIC in determining the financial capacity to perform under
the terms of this Agreement.

SECTION IV. INSURANCE OPERATIONS
The Company’s Plan shall include:
(a)

The name, title, mailing address, e-mail address, office telephone numbers, and
fax telephone numbers of the officer or employee authorized by the Company to
sign and certify the Monthly Settlement Report. Any changes regarding the
officer or employee shall be provided to FCIC in writing prior to the submission
of the next Monthly Settlement Report.

(b)

The names, titles, mailing addresses, e-mail addresses, office telephone numbers,
and fax telephone numbers of at least two officers or employees authorized by the
Company, and two officers or employees authorized by the MGA, if an MGA is
designated by the Company, as managers of the eligible crop insurance contracts
reinsured under the Agreement. Each person will act as liaison or contact between
the Company and FCIC regarding this Agreement.

(c)

The names, mailing addresses, e-mail addresses, office telephone numbers, and
fax telephone numbers of the office of the Company, or any entity, that qualifies
as a service provider and a description of the services it provides.

(d)

The names, mailing addresses, e-mail addresses, office telephone numbers, and
fax telephone numbers of all regional offices and service centers operated by the
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Company or its MGA that provides a service related to eligible crop insurance
contracts reinsured under this Agreement and a description of the services they
provide.
(e)

An organizational chart showing the names and positions of individuals
performing the following functions with respect to Federal crop insurance
operations: chief executive officer, chief operations officer, chief financial officer,
and the highest ranking individuals responsible for information technology,
underwriting, claims, quality control, training and development, sales and
marketing, compliance, and reinsurance. If an individual performs more than one
of the foregoing functions, the chart shall so indicate. Any changes to the
information contained in this chart shall be reported within 30 days to FCIC in
writing.

(f)

The name and address of the Company or MGA, if applicable, and the bank that
will make Electronic Funds Transfer payments to FCIC for the Company.

(g)

The name, street address, city, county, state, country, city code, county code, state
code, country code, (codes can be obtained from http://www.itl.nist.gov and
http://www.itl.nist.gov/itl) and Congressional District for the organization to
whom payments from FCIC should be remitted for amounts due on Monthly and
Annual Settlement reports.

(h)

A declaration as to the Company’s intention to use the Escrow Agreement and
associated procedures, for reimbursement by FCIC to cover losses paid by the
Company. If the Company elects to use the Escrow Agreement, the Company
shall provide the following (a copy may be provided if the required documents
were provided in a prior reinsurance year and no changes have been made):
(1)

An executed copy of the agreement regarding the Reinsurance Escrow
Arrangement between the Company and FCIC; and

(2)

An executed copy of the Escrow Agreement between the Bank and FCIC.

(i)

The Training and Performance Evaluation Plan (TPEP) and the Training and
Performance Evaluation Report (TPER) required in section II of Appendix IV.
The TPEP will be approved if all elements identified in Appendix IV are
contained therein. Approval of the TPEP in the Plan of Operations is not a
determination of the sufficiency of the Company’s training and evaluation
program.

(j)

The Company’s quality control information required in section I(a) of Appendix
IV. The quality control information provided by the Company will be approved if
all elements identified in section I(a) of Appendix IV are contained therein and
such approval with the Plan of Operations is not a determination of the
sufficiency of the Company’s quality controls.
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(k)

With respect to section II(a)(5) of the Agreement:
(1)

(2)

(l)

07-01-20

The Company shall review its contract arrangements with any affiliate
that is also a cooperative or trade association (or any affiliate that, in turn,
has a contractual arrangement with a cooperative or trade association) to
determine whether the cooperative or trade association seeks to qualify
for payments to producers under section 508(b)(5)(B) of the Act (7
U.S.C. § 1508 (b)(5)(B)). If a cooperative or trade association seeks to
qualify under section 508(b)(5)(B) of the Act, the Company shall submit
the items listed below and receive written FCIC approval before the
cooperative or trade association will be deemed to qualify under section
508(b)(5)(B) of the Act.
(A)

The names, addresses, and telephone numbers of each cooperative
association or trade association with which the Company or its
affiliates intends to enter into a licensing or other financial
agreement or contract authorized by sections 508(b)(5)(B) , or has
entered into such agreements;

(B)

A copy of the agreement or contract with the cooperative
association or trade association and a list of the states where the
cooperative association or trade association will return all or part
of the CAT administrative fee received from the Company to its
producers; and

(C)

For each State listed in subparagraph (B), a letter from the State
Insurance Department stating whether the payment of all or a
portion of the CAT administrative fees on behalf of producers is in
compliance with the rebating laws of such State.

For those cooperative or trade associations previously determined by
FCIC to have qualified under section 508(a)(9)(B)(iii) of the Act, the
Company shall provide a current certification from an officer of the
cooperative or trade association that it will make any payments to its
producers during the reinsurance year under the same terms and conditions
under which it received original approval from FCIC.

E-Business Implementation Plan: The Company shall include the following
information to demonstrate compliance with the Freedom to E-File Act and
section 508 of the Rehabilitation Act (29 U.S.C. § 794(d)).
(1)

The process the Company will use to provide and receive electronically all
required forms and other information concerning the Federal crop
insurance program. The Company shall provide a description of:

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(A)

The process the Company will use to allow producers to file
electronically all paperwork required for participation in the
program.

(B)

The type of electronic signature that will be used by producers.

(C)

The name, address and e-mail address for one contact person with
the vendor being used to provide electronic signatures.

(D)

The security measures the Company will use to protect the
confidential nature of the data and information submitted by
producers from being reviewed, revised or otherwise used by
unauthorized persons. A third-party certification of security
measures shall be obtained from a recognized security certification
firm and shall be provided.

(E)

The process the Company will use to document revisions to data
and information submitted by producers.

(F)

The storage, backup and retention procedures being used by the
Company for electronically filed documents. Provide the name,
address, and phone number for one contact person for the
Company who manages the storage and backup procedures for the
Company.

(2)

The names, URL's, facsimile numbers, and mailing addresses of each
location where producers may electronically access and file the paperwork
required for participation in the program.

(3)

Describe the directions being provided with respect to how to access the
information and forms, properly completing and submitting them; meeting
filing deadlines; obtaining user ID and password, etc.

(4)

The online responsibilities of the crop insurance agent to each producer
who files or retrieves required paperwork electronically with the
Company.

(5)

The process for obtaining consent from the producer to electronically
conduct crop insurance business on a partial or complete basis with the
Company.

(6)

Provide the procedures a producer must use to withdraw consent to
electronically conduct crop insurance business on a partial or complete
basis with the Company.

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(m)

(n)

(o)

07-01-20

(7)

Provide the procedures that a producer must use to request a paper copy of
an electronic record.

(8)

The statement of the required hardware and software needed by a producer
to access, obtain, and retain electronic documents from the Company.

A general description of the Company’s Information Technology architecture and
operating environment (e.g., hardware and software) to establish operating
capacity and compatibility with RMA systems, including whether these systems
are managed in-house or through service providers, and the names of any such
service providers. The description should, at a minimum, include the types and
major version numbers of operating systems and databases; major programming
languages and software products; and the name and major version number, if
applicable, of any Company developed system that interacts with RMA systems,
including a general description of the network architecture and security
capabilities of such systems and industry standards or methodologies used for
data exchange and software development.
A complete description of the process the Company will use to retain all records
relative to eligible crop insurance contracts reinsured under this Agreement (e.g.
applications, acreage reports, summaries of coverage, claims of loss, etc.).
(1)

The description shall include the office addresses and telephone numbers
of the locations where such records are retained.

(2)

If records are retained by sales agencies or sales agents, the Company
shall report those records’ location(s) in accordance with Appendix III.

(3)

The description shall include a certification that the Company has in place
the security measures sufficient to ensure the confidentiality, integrity, and
availability of any records in a manner consistent with FISMA.

(4)

If records are kept electronically, the description shall include the
processes and procedures for electronic storage and retrieval of such
records, including locations of the principal and backup server locations.

If requested by FCIC, any information related to the Company or MGA that
would assist FCIC in determining the operational capacity to perform under the
terms of this Agreement.

SECTION V. FCIC REINSURANCE BUSINESS PLAN
The Plan shall include:
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(a)

The maximum reinsurable net book premium volume for which the Company
requests reinsurance. (This may be more than the total provided for item (V)(b)).

(b)

A designation as to the States in which the Company seeks to be authorized to sell
and service eligible crop insurance contracts and estimates of the net book
premium assigned to each fund within each designated State as specified in the
Estimated Premium Template.

(c)

A declaration of the percent of the net book premiums and associated liability for
ultimate net losses the Company will retain in the Commercial Fund for each
State designated in accordance with section V(b), as specified in the Commercial
Fund Template.

(d)

(1)

Selling and servicing eligible crop insurance contracts in a State for which
no declaration has been made by the Company under this subsection will
result in the automatic designated of a retention of 100 percent net book
premium and associated liability for ultimate net losses for such State.

(2)

In the case of the Company acquiring another AIP, the Company merging
with another AIP, or the Company being acquired by another AIP, and the
percentage declarations for any State made under section V(c) are
different between the Company and the other AIP, the Commercial Fund
retention percentage for the combined net book premiums and associated
liability in such States will be deemed by FCIC to be the higher
percentage.

The Company’s intention to reinsure a portion of its net liability (after FCIC
reinsurance) in accordance with section II(b)(11) of the Agreement. The
Company shall submit, within 10 days of its receipt of the executed reinsurance
documentation, a copy of the reinsurance documentation (agreements or cover
notes) related to eligible crop insurance contracts reinsured under this Agreement.
The reinsurance documentation shall be executed by all parties and include:
(1)

The percent subscribed by each reinsurer to each arrangement, treaty, or
binder, and the names of each reinsurer, intermediary, or broker; and

(2)

A description of the type of reinsurance, retentions, attachment points and
limits, aggregate limits, minimum deposit, premium rates, and all other
applicable terms.

SECTION VI. RISK ASSESSMENT AND CONTINGENCY PLAN
The risk assessment shall consist of, at a minimum, the following:
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(a)

A copy of the latest maximum probable loss risk assessment, whether prepared by
or on behalf of the Company. The assessment shall detail the magnitude and
frequencies of the risks assessed and include a description of the methodology
used.

(b)

For each of the risks listed in subsection (c):
(1)

An estimate of the probability of occurrence;

(2)

A rationale for the estimate;

(3)

An assessment of the impact on the Company; and

(4)

A contingency plan for how the Company will be able to meet the
obligations under the Agreement should the event described by such risk
occur. The plan shall describe:
(A)

How the Company will ensure that sufficient resources will be
available to continue operations and service eligible crop insurance
contracts for current and any previous reinsurance years, as
applicable;

(B)

How the Company would meet its obligations for continuity of
indemnity payments to producers, to accurately calculate premium
and indemnities, to bill premium timely, and to prevent data
corruption;

(C)

If the Company uses an MGA identify how the Company will
obtain or retain sufficient financial and operational capacity to
manage a delivery system through resources other than those
currently provided by the MGA;

(D)

How the Company will ensure that sufficient cash resources will
be retained to continue servicing operations and meet all
requirements of the Agreement;

(E)

How the Company will ensure that it retains sufficient expertise in
crop insurance sales, underwriting, loss adjustment, quality
control, data processing, and all other facets of crop insurance sales
and service to continue operations until all requirements of the
Agreement have been met; and

(F)

The physical security of current and backup systems; how backup
systems will be deployed in the event they are needed; an estimate
as to how long before normal operations may be expected to
resume in the event the backup system is needed as the primary
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operational system; and how personally identifiable information
will be protected in a transition from primary to backup systems.

(c)

Risks:
(1)

Crop insurance expenses exceed the A&O subsidy provided by FCIC.

(2)

Underwriting gains are insufficient to offset any expense deficit identified
in paragraph (1).

(3)

Policyholder surplus decreases more than ten percent in any calendar year.

(4)

A significant interruption occurs in computer hardware or software that
affects operations or data transfer capabilities (such as due to a computer
virus, security breach, communications failure, etc.).

(5)

A rating agency determines the Company’s ability to meet its current
obligations is marginal and that its financial condition is vulnerable.

(6)

Lines of credit or other financial arrangements become unavailable or is
inadequate to meet cash flow needs.

(7)

Commercial reinsurance becomes unavailable or its cost rises (or ceding
commissions received decline) significantly.

(8)

If the Company uses an MGA or service providers, the MGA or service
provider:

(9)

(d)

(A)

Is no longer able to perform the requirements of its agreement with
the Company;

(B)

No longer has the financial or operational capacity to enable the
Company to comply with the requirements of the Agreement; or

(C)

Becomes ineligible to participate in the Federal crop insurance
program.

Any other material threat or risk that the Company may be aware of or
have prior knowledge of that should be considered in the selling and
servicing of eligible crop insurance contracts reinsured under the
Agreement.

If requested by FCIC, the Company shall submit information that would assist
FCIC in determining the capacity of the Company or MGA, if applicable, to
continue operations under the terms of this Agreement during and following a
pandemic, terrorist, or other catastrophic event.
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