General Administrative Regulations; Reinsurance Agreement-Standards for Approval; Regulations for the 2019 and Subsequent Reinsurance Years., 51301-51303 [2018-21699]

Agencies

• DEPARTMENT OF AGRICULTURE
• Federal Crop Insurance Corporation

[Federal Register Volume 83, Number 197 (Thursday, October 11, 2018)]
[Rules and Regulations]
[Pages 51301-51303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21699]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

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Federal Register / Vol. 83, No. 197 / Thursday, October 11, 2018 / 
Rules and Regulations

[[Page 51301]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

[Docket No. FCIC-17-0005]
RIN 0563-AC54


General Administrative Regulations; Reinsurance Agreement--
Standards for Approval; Regulations for the 2019 and Subsequent 
Reinsurance Years.

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
General Administrative Regulations; Subpart L--Reinsurance Agreement--
Standards for Approval; Regulations for the 2019 and Subsequent 
Reinsurance Years. The intended effect of this action is to clarify and 
improve Subpart L to better align with the existing Standard 
Reinsurance Agreement (SRA) and Livestock Price Reinsurance Agreement 
(LPRA) and to eliminate language that is no longer relevant.

DATES: This rule is effective November 13, 2018.

FOR FURTHER INFORMATION CONTACT: David L. Miller, Director, Reinsurance 
Services Division, Federal Crop Insurance Corporation, United States 
Department of Agriculture (USDA), 1400 Independence Avenue SW, Stop 
0801, Washington, DC 20250, telephone (202) 720-9830.

SUPPLEMENTARY INFORMATION: 

Background

    This rule finalizes changes to the General Administrative 
Regulations; Subpart L--Reinsurance Agreement--Standards for Approval; 
Regulations for the 2019 and Subsequent Reinsurance Years (7 CFR part 
400, subpart L), that were published by FCIC on February 8, 2018, as a 
notice of proposed rulemaking in the Federal Register at 83 FR 5573--
5576. The public was afforded 60 days to submit comments after the 
regulation was published in the Federal Register.
    A total of one comment was received from one commenter. The 
commenter was an insurance company.
    The public comment received regarding the proposed rule and FCIC's 
response to the comment is as follows:
    Comment: One comment was received from an insurance company asking 
for a definition of ``outcome'' which was added to Section 400.169(b).
    Response: FCIC removed the term outcome and returned Section 
400.169(b) to its original language.

Executive Orders 12866, 13563, and 13771

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasized the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility. The Office of 
Management and Budget (OMB) designated this rule as not significant 
under Executive Order 12866, ``Regulatory Planning and Review,'' and 
therefore, OMB has not reviewed this rule. Executive Order 13771, 
``Reducing Regulation and Controlling Regulatory Costs,'' requires 
that, in order to manage the costs required to comply with Federal 
regulations, that for every new significant or economically significant 
regulation issued, the new costs must be offset by the elimination of 
at least two prior regulations. This rule is not subject to Executive 
Order 13771.

Paperwork Reduction Act of 1995

    Pursuant to the provisions of the Paperwork Reduction Act of 1995 
(44 U.S.C. chapter 35), the collections of information in this rule 
have been approved by the Office of Management and Budget (OMB) under 
control number 0563-0069.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of title II of the UMRA) for 
State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    FCIC has assessed the impact of this rule on Indian tribes and 
determined that this rule does not, to its knowledge,

[[Page 51302]]

have tribal implications that require tribal consultation under E.O. 
13175. If a Tribe requests consultation, FCIC will work with the Office 
of Tribal Relations to ensure meaningful consultation is provided where 
changes, additions and modifications identified herein are not 
expressly mandated by Congress.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, and all producers are required to submit a notice of 
loss and production information to determine the amount of an indemnity 
payment in the event of an insured cause of crop loss. Whether a 
producer has 10 acres or 1000 acres, there is no difference in the kind 
of information collected. To ensure crop insurance is available to 
small entities, the Federal Crop Insurance Act (Act) authorizes FCIC to 
waive collection of administrative fees from beginning farmers or 
ranchers and limited resource farmers. FCIC believes this waiver helps 
to ensure that small entities are given the same opportunities as large 
entities to manage their risks through the use of Federal crop 
insurance. A Regulatory Flexibility Analysis has not been prepared 
since this regulation does not have an impact on small entities, and, 
therefore, this regulation is exempt from the provisions of the 
Regulatory Flexibility Act (5 U.S.C. 605). This regulation pertains to 
all legal entities wanting a Reinsurance Agreement, to insure financial 
stability and capacity under this regulation.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. Interpretations of statutory and regulatory 
provisions are matters of general applicability and, therefore, no 
administrative appeals process is available and judicial review may 
only be brought to challenge the interpretation after seeking a 
determination of appeal ability by the Director of the National Appeals 
Division (NAD) in accordance with 7 CFR part 11. An interpretation of a 
policy provision not codified in the Code of Federal Regulations or any 
procedure used in the administration of any Federal crop insurance 
program are administratively appealable and the appeal provisions 
published at 7 CFR part 11 must be exhausted before any action for 
judicial review may be brought against FCIC.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, or safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

List of Subjects in 7 CFR Part 400

    Administrative practice and procedure, crop insurance, reporting 
and recordkeeping requirements.

Final Rule

    Accordingly, as set forth in the preamble, FCIC amends 7 CFR part 
400 as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

0
1. Revise subpart L to read as follows:
Subpart L--Reinsurance Agreement--Standards for Approval; Regulations 
for the 2019 and Subsequent Reinsurance Years
Sec.
400.161 Definitions.
400.162 Qualification ratios.
400.163 Applicability.
400.164 Eligibility for a Reinsurance Agreement.
400.165-400.168 [Reserved]
400.169 Disputes.
400.170-400.177 [Reserved]

    Authority:  7 U.S.C. 1506(l), 1506(o)

Subpart L--Reinsurance Agreement--Standards for Approval; 
Regulations for the 2019 and Subsequent Reinsurance Years.


Sec.  400.161  Definitions.

    In addition to the terms defined in the Standard Reinsurance 
Agreement, Livestock Price Reinsurance Agreement and any other 
Reinsurance Agreement, the following terms as used in this rule are 
defined to mean:
    Annual statutory financial statement means the annual financial 
statement of a Company prepared in accordance with Statutory Accounting 
Principles and submitted to the state insurance department if required 
by any state in which the Company is licensed.
    Company means the insurance company that currently has or is 
applying to FCIC for a Reinsurance Agreement.
    FCIC means the Federal Crop Insurance Corporation as authorized in 
section 503 of the Federal Crop Insurance Act (7 U.S.C. 1503).
    MPUL means the maximum possible underwriting loss that a Company 
can sustain on policies it intends to reinsure after adjusting for the 
effect of any Reinsurance Agreement and any private reinsurance, as 
evaluated by FCIC.
    Plan of Operations means the documentation and information 
submitted by a Company to apply for or maintain a Reinsurance Agreement 
as required by FCIC.
    Quarterly Statutory Financial Statement means the quarterly 
financial statement of a Company prepared in accordance with Statutory 
Accounting Principles and submitted to the state insurance department 
if required by any state in which the Company is licensed.
    Reinsurance Agreement means the Standard Reinsurance Agreement, 
Livestock Price Reinsurance Agreement or any other Reinsurance 
Agreement between the Company and FCIC.


Sec.  400.162   Qualification ratios.

    (a) The eighteen qualification ratios include:
    (1) Thirteen National Association of Insurance Commissioner's 
(NAIC) Insurance Regulatory Information System (IRIS) ratios found in 
paragraphs (b)(1) through (12) and (17) of this section and referenced 
in ``Using the NAIC Insurance Regulatory Information System'' 
distributed by NAIC, 1100 Walnut St., Suite 1500, Kansas City, MO 
64106-2197;
    (2) Three ratios used by A.M. Best Company found in paragraphs 
(b)(13), (15), and (16) of this section and referenced in Best's Key 
Rating Guide, A.M. Best, Ambest Road, Oldwick, N.J. 08858-0700;
    (3) One ratio found in paragraph (b)(14) of this section which is 
formulated by FCIC and is calculated the same as the One-Year Change to 
Surplus IRIS ratio but for a two-year period; and
    (4) One ratio found in paragraph (b)(18) of this section, which is 
reported

[[Page 51303]]

on the annual statutory financial statement.
    (b) The Company shall provide an explanation for any ratio falling 
outside of the following requirements in paragraphs (b)(1) through 
(18):

------------------------------------------------------------------------
                                                               Ratio
                          Ratio                             requirement
------------------------------------------------------------------------
(1) Gross Premium Written to Policyholders Surplus......           <900%
(2) Net Premium Written to Policyholders Surplus........           <300%
(3) Change in Net Premiums Writings.....................     -33% to 33%
(4) Surplus Aid to Policyholders Surplus................            <15%
(5) Two-Year Overall Operating Ratio....................           <100%
(6) Change in Policyholders Surplus.....................     -10% to 50%
(7) Investment Yield....................................    3.0% to 6.5%
(8) Liabilities to Liquid Assets........................           <100%
(9) Gross Agents Balances to Policyholders Surplus......            <40%
(10) One Year Reserve Development to Policyholders                  <20%
 Surplus................................................
(11) Two Year Reserve Development to Policyholders                  <20%
 Surplus................................................
(12) Estimated Current Reserve Deficiency to                        <25%
 Policyholders Surplus..................................
(13) Combined Ratio after Policyholder Dividend.........           <115%
(14) Two Year Change in Surplus.........................           >-10%
(15) Quick Liquidity....................................            >20%
(16) Return on Surplus..................................            >-5%
(17) Net Change in Adjusted Policyholder Surplus........     -10% to 25%
(18) Risk Based Capital Ratio...........................          > 200%
------------------------------------------------------------------------

Sec.  400.163  Applicability.

    The standards contained herein shall be applicable to a Company 
applying for and those maintaining a Reinsurance Agreement.


Sec.  400.164  Eligibility for a Reinsurance Agreement.

    FCIC will offer a Reinsurance Agreement to an eligible Company as 
determined by FCIC. To be eligible and qualify initially or thereafter 
for a Reinsurance Agreement with FCIC, a Company must:
    (a) Be licensed or admitted in any state, territory, or possession 
of the United States;
    (b) Be licensed or admitted, or use as a policy-issuing company, an 
insurance company that is licensed or admitted, in each state where the 
Company will write policies under a Reinsurance Agreement;
    (c) Have surplus, as reported in its most recent Annual or 
Quarterly Statutory Financial Statement, that is at least equal to 
twice the MPUL amount for the Company's estimated retained premium 
submitted in its plan of operation.
    (d) The Company shall have the financial and operational resources, 
including but not limited to, organization, experience, internal 
controls, technical skills, positive assessment of the ratio results 
appearing in Section 400.162 as well as meet methodologies, data 
submission requirements and assessment contained in Appendix II (Plan 
of Operations) of the Reinsurance Agreement to meet the requirements, 
including addressing reasonable risks, associated with a Reinsurance 
Agreement, as determined by FCIC.
    (e) The Company shall provide data and demonstrate a satisfactory 
performance record to obtain a Reinsurance Agreement and continue to 
hold a Reinsurance Agreement for the reinsurance year as determined by 
FCIC.


Sec.  400.165-400.168  [Reserved]


Sec.  400.169  Disputes.

    (a) If the Company believes that the FCIC has taken an action that 
is not in accordance with the provisions of a Reinsurance Agreement 
except compliance issues, it may request the Deputy Administrator of 
Insurance Services to make a final administrative determination 
addressing the disputed action. The Deputy Administrator of Insurance 
Services will render the final administrative determination of the FCIC 
with respect to the applicable actions. All requests for a final 
administrative determination must be in writing and submitted within 45 
days after receipt after the disputed action.
    (b) With respect to compliance matters, the Compliance Field Office 
renders an initial finding, permits the Company to respond, and then 
issues a final finding. If the Company believes that the Compliance 
Field Office's final finding is not in accordance with the applicable 
laws, regulations, custom or practice of the insurance industry, or 
FCIC approved policy and procedure, it may request the Deputy 
Administrator of Compliance to make a final administrative 
determination addressing the disputed final finding. The Deputy 
Administrator of Compliance will render the final administrative 
determination of the FCIC with respect to the final finding. All 
requests for a final administrative determination must be in writing 
and submitted within 45 days after receipt of the final finding.
    (c) A Company may also request reconsideration by the Deputy 
Administrator of Insurance Services of a decision of the FCIC rendered 
under any FCIC bulletin or directive which bulletin or directive does 
not interpret, explain, or restrict the terms of the Reinsurance 
Agreement. The Company, if it disputes the FCIC's determination, must 
request a reconsideration of that determination in writing, within 45 
days of the receipt of the determination. The determination of the 
Deputy Administrator of Insurance Services will be final and binding on 
the Company. Such determinations will not be appealable to the Board of 
Contract Appeals.
    (d) Appealable final administrative determinations of the FCIC 
under paragraph (a) or (b) of this section may be appealed to the Board 
of Contract Appeals in accordance with 48 CFR part 6102 and with the 
provisions 7 CFR part 24.


Sec.  400.170-400.177  [Reserved]

Martin R. Barbre,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2018-21699 Filed 10-10-18; 8:45 am]
 BILLING CODE 3410-08-P