[Federal Register Volume 61, Number 217 (Thursday, November 7, 1996)]
[Proposed Rules]
[Pages 57595-57597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28608]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 61, No. 217 / Thursday, November 7, 1996 /
Proposed Rules
[[Page 57595]]
DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 400
RIN 0563-AB05
General Administrative Regulations; Nonstandard Underwriting
Classification System
AGENCY: Federal Crop Insurance Corporation.
ACTION: Proposed rule.
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SUMMARY: Federal Crop Insurance Corporation (FCIC) proposes to amend
subpart O of the General Administrative Regulations, effective with the
1998 (1999 for Texas and Arizona/California Citrus) and succeeding crop
years. This proposed amendment is intended to clarify the effect of the
Nonstandard Underwriting Classification System (NCS) and to ensure that
NCS is applied to all producers in a fair and consistent manner.
DATES: Written comments, data, and opinions on this proposed rule will
be accepted until close of business January 6, 1997, and will be
considered when the rule is to be made final. The comment period for
information collection under the Paperwork Reduction Act of 1995
continues through January 6, 1997.
ADDRESSES: Written comments, data, and opinions on this proposed rule
should be sent to the Chief, Product Development Branch, Federal Crop
Insurance Corporation, United States Department of Agriculture, 9435
Holmes Road, Kansas City, MO 64131. Written comments will be available
for public inspection and copying in room 0324, South Building, USDA,
14th and Independence Avenue, SW., Washington, DC, 8:15 a.m.-4:45 p.m.,
est, Monday through Friday, except holidays.
FOR FURTHER INFORMATION CONTACT: For further information, contact Bill
Smith, Supervisory Insurance Management Specialist, Research and
Development Division, Product Development Branch, FCIC, at the Kansas
City, MO address listed above, telephone (816) 926-7743.
SUPPLEMENTARY INFORMATION:
Executive Order 12866 and Departmental Regulation 1512-1
This action has been reviewed under United States Department of
Agriculture (USDA) procedures established by Executive Order 12866 and
Departmental Regulation No. 1512-1. This action constitutes a review as
to the need, currency, clarity, and effectiveness of these regulations
under those procedures. The sunset review date established for these
regulations is June 1, 2000.
This rule has been determined to be not significant for the
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget (OMB).
Paperwork Reduction Act of 1995
This rule does not contain information collection requirements that
require approval by OMB under the Paperwork Reduction Act of 1995 (44
U.S.C. chapter 35).
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate 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. Under section 202 of the UMRA, FCIC
generally must prepare a written statement, including a cost-benefit
analysis, for proposed and final rules with ``Federal mandates'' that
may result in expenditures to State, local, or tribal governments, in
the aggregate, or to the private sector, of $100 million or more in any
1 year. When such a statement is needed for a rule, section 205 of the
UMRA generally requires FCIC to identify and consider a reasonable
number of regulatory alternatives and adopt the least costly, more
cost-effective or least burdensome alternative that achieves the
objectives of the rule.
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. Thus, this rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Executive Order 12612
It has been determined under section 6(a) of Executive Order 12612,
Federalism, that this rule does not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment. The
policies and procedures contained in this rule will not have a
substantial direct effect on States or their political subdivisions, or
on the distribution of power and responsibilities among the various
levels of Government.
Regulatory Flexibility Act
NCS program determinations are applied equally on a county basis
and affect only a small number to insureds (approximately 1 percent of
all insureds). This regulation will not have a significant impact on a
substantial number of small entities. Therefore, this action is
determined to be exempt from the provisions of the Regulatory
Flexibility Act (5 U.S.C. 605) and no Regulatory Flexibility Analysis
was prepared.
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 12778
The Office of the General Counsel has determined that these
regulations meet the applicable standards provided in subsections 2(a)
and 2(b)(2) of Executive Order 12778. The provisions of this rule will
preempt State and local laws to the extent such State and local laws
are inconsistent herewith. The administrative appeal provisions
published at 7 CFR parts 11 and 780 must be exhausted before judicial
action may be brought.
Environmental Evaluation
This action is not expected to have any significant impact on the
quality of the human environment, health, and
[[Page 57596]]
safety. Therefore, neither an Environmental Assessment nor an
Environmental Impact Statement is needed.
National Performance Review
The regulatory action is being taken as part of the National
Performance Review Program to eliminate unnecessary regulations and
improve those that remain in force.
Background
FCIC proposes to amend the General Administrative Regulations (7
CFR part 400, subpart O) effective for the 1998 (1999 for Texas and
Arizona/California Citrus) and succeeding crop years. The principal
changes to the provisions are as follows:
1. Section 400.302--Clarify the definitions of ``actively engaged
in farming'' and ``insurance experience;'' rename the term ``base
period,'' as ``NCS base period'' and clarify the definition; and add
definitions for ``earned premium'' and ``indemnified loss''.
2. Section 400.303--In paragraph (a), expand the nonstandard
classification selection criteria by adding several new criteria to
assist efforts to identify those producers whose potential adverse
impact on insurance program performance is greatest. Specify that the
minimum standards provided in this subsection may be different in a
specific county if that county's insurance experience is substantially
different from the insurance experience for which the criteria were
determined. Add paragraph (c) to describe adjustments which may be made
to insurance experience due to widespread adverse weather conditions
and other causes.
3. Section 400.305, paragraph (c)--Permit nonstandard
classifications for persons, land, and any combination thereof to be
assigned on a crop or crop practice, type, varietal, or crop option
basis.
4. Section 400.307--Clarify that nonstandard classifications for
persons, or persons on identified land will be discontinued in the case
of the person's death or if the person has discontinued farming. In
such cases, insurance experience will not change, so there is no
administrative reason to continue to annually review these listings.
FCIC will determine whether the person has ``discontinued farming'' by
determining that all present and future potential for farming has
ceased, e.g., sold all cropland and means of crop production. If the
person begins farming again, or acquires a substantial beneficial
interest in any farming operation, the nonstandard classification will
be reinstated.
5. Section 400.309, paragraph (a) is revised to change the deadline
for submitting reconsiderations from 45 days to 30 days to be
consistent with appeal regulations a 7 CFR parts 11 and 780. Paragraphs
(e) and (f) are deleted because regulations for filing an appeal are
provided in 7 CFR parts 11 and 780.
List of Subjects in 7 CFR Part 400
Crop insurance; Nonstandard Underwriting Classification System.
Accordingly, pursuant to the authority contained in the Federal
Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.) the Federal Crop
Insurance Corporation proposes to amend 7 CFR part 400, subpart O,
effective for the 1998 (1999 for Texas and Arizona/California Citrus)
and succeeding crop years, as follows:
PART 400--[AMENDED]
Subpart O--Nonstandard Underwriting Classification System
1. The authority citation for 7 CFR part 400, subpart O, is revised
to read as follows:
Authority: 7 U.S.C. 1506(1), 1506(p).
2. In Sec. 400.302, remove all paragraph designations and the
definition of ``base period;'' the definition of ``actively engaged in
farming'' and ``insurance experience'' are revised; and definitions of
``earned premium,'' ``indemnified loss,'' and ``NCS base period'' are
added to read as follows:
Sec. 400.302 Definitions.
Actively engaged in farming--means a person who, in return for a
share of profits and losses, makes a significant contribution to the
production of an insurable crop in the form of capital, equipment,
land, personal labor, or personal management.
Earned premium--means premium earned (both the amount subsidized
and the amount paid by the producer, but excluding any amount of the
subsidy attributed to the operating and administrative expenses of the
insurance provider) for a crop under a policy insured or reinsured by
the Corporation.
Indemnified loss--means a loss applicable for the policy for any
year during the NCS base period for which the total adjusted indemnity
exceeds the total earned premium. If the person has insurance for the
crop in more than one county for any crop year, indemnities and
premiums will be accumulated for all counties for each crop year to
determine an indemnified loss.
Insurance experience--means earned premiums, indemnities paid
(after applicable adjustments), and other data for the crop (but not
including replant payments), resulting from all of the insured's crop
insurance policies insured or reinsured by the Corporation for one or
more crop years and will include all information from all counties in
which the person was insured.
NCS base period--means the 10 consecutive crop years (as defined in
the crop policy) ending 1 crop year prior to the crop year in which the
NCS classification becomes effective for all crops except Arizona,
California and Texas citrus (production) and sugarcane. For these
excepted crops, the NCS base period means the 10 consecutive crop years
ending 2 crop years prior to the crop year in which the NCS
classification becomes effective. For example: An NCS classification
effective for the 1996 crop year against a producer of citrus
production in Arizona, California, and Texas, and sugarcane would have
a NCS base period that includes the 1984 through 1993 crop years. An
NCS classification effective for the 1996 crop year against a producer
of all other crops would have a NCS base period that includes the 1985
through 1994 crop years.
3. Section 400.303 is amended by revising paragraph (a) and adding
paragraph (c) to read as follows:
Sec. 400.303 Initial selection criteria.
(a) Nonstandard Classification procedures in this subpart initially
apply when all of the following insurance experience criteria (see
paragraph (c) of this section) for the crop have been met:
(1) Three or more indemnified losses during the NCS base period;
(2) Cumulative indemnities in the NCS base period that exceed
cumulative premiums during the same period by at least $500.00;
(3) A premium has been earned in at least 1 of the most recent 4
crop years in the NCS base period;
(4) The result of dividing the number of indemnified losses during
the NCS base period by the number of years premium is earned for that
period equals .30 or greater; and
(5) Either of the following apply:
(i) The natural logarithm of the cumulative earned premium rate
multiplied by the square root of the cumulative loss ratio equals 2.00
or greater; or
(ii) Five (5) or more indemnified losses have occurred during the
NCS base period and the cumulative loss ratio equals or exceeds 1.50.
The minimum standards provided in paragraphs (a)(2), (3), (4), and (5)
of this
[[Page 57597]]
section may be increased in a specific county if that county's overall
insurance experience for the crop is substantially different from the
insurance experience for which the criteria was determined. The
increased standard will apply until the conditions requiring the
increase no longer apply. Any change in the standards will be contained
in the Special Provisions for the crop.
* * * * *
(c) Insurance experience for the crop may be adjusted, by county
and crop year, to discount the effect of indemnities caused by
widespread adverse growing conditions. Adjustments are determined as
follows:
(1) Determine the average yield for the county using the annual
county crop yields for the previous 20 crop years, unless such data is
not available;
(2) Determine the normal variability in the average yield for the
county, expressed as the standard deviation;
(3) Subtract the result of paragraph (c)(2) from paragraph (c)(1);
(4) Divide the annual crop yield for the county for each crop year
in the NCS base period by the result of paragraph (c)(3), the result of
which may not exceed 1.0;
(5) Subtract the result of paragraph (c)(4) for each crop year from
1.0;
(6) Multiply the result of paragraph (c)(5) by the liability for
the crop year; and
(7) Subtract the result of paragraph (c)(6) from any indemnity for
that crop year. FCIC may substitute the crop yields of a comparable
crop in determining paragraphs (c) (1) and (2), or may adjust the
average yield or the measurement of normal variability for the county
crop, or any combination thereof, to account for trends or unusual
variations in production of the county crop or if the availability of
yield and loss data for the county crop is limited. Alternate methods
of determining the effects of adverse growing conditions on insurance
experience may be implemented by FCIC if allowed in the Special
Provisions.
4. Section 400.305 is amended by revising the introductory text of
paragraph (c) to read as follows:
Sec. 400.305 Assignment of Nonstandard Classification.
* * * * *
(c) A Nonstandard Classification may be assigned to identified
insurable acreage; a person; or to a combination of person and
identified acreage for a crop or crop practice, type, variety, or crop
option or amendment whereby:
* * * * *
5. Section 400.307 is amended by adding two sentences at the end
thereof to read as follows:
Sec. 400.307 Discontinuance of participation.
* * * * *
A Nonstandard Classification will no longer be applicable to the
person or the person on identified acreage if the Corporation
determines the person is deceased or has discontinued all farming
operations for all crops, such as the legitimate sale of the farming
operation to a disinterested person. If the person who discontinues all
crop farming operations later returns to farming or obtains a
substantial beneficial interest in a farming operation, the nonstandard
classification will be reinstated.
6. In Sec. 400.309, paragraph (a) is amended by revising the phrase
``45 days'' to read ``30 days'' and paragraphs (e) and (f) are removed.
Signed in Washington, D.C., on October 31, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-28608 Filed 11-6-96; 8:45 am]
BILLING CODE 3410-FA-P
