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Specific Comments on the Proposed Rule

For the reasons addressed above, it is our recommendation that the proposed rule be shelved and no final rule published. There is precedent for this, as that is precisely the action RMA took on the earlier proposed rule that was published in May, 1999.

If despite our recommendation this proposed rule is to receive further consideration that results in a final rule, we offer the following specific comments, observations and suggestions.

Regulatory Flexibility Act - The preamble to the proposed rule asserts that, relative to the Regulatory Flexibility Act, this regulation will not have a significant economic impact on a substantial number of small entities. The preamble further asserts that the rule does not increase the burden on any entity. We strongly disagree with these assertions. If adopted, this rule will affect the sales strategies, sales techniques and income of thousands of agents who sell and service policies, most of whom qualify as small entities under the Regulatory Flexibility Act. As the rule acknowledges, the potential prime target for any PRP will be a reduction in agent commissions; thus, the impact is likely to be immediate and direct.

Section 400.701 Definitions

Administrative and operating costs – This definition should specify that the costs should exclude the cost of delivering CAT policies, as CAT policies would not be subject to premium reduction plans since they do not involve farmer premiums. Additionally, the definition is unclear as to what specific costs should be included (for example, cost of reinsurance, front fees, allocated costs, etc.).

Administrative and operating subsidy – We believe since CAT policies are not eligible for a PRP, CAT subsidy should be excluded from the definition.

Compensation – The proposed rule states: Profit sharing arrangements will NOT be considered compensation when: 1) the payments under such arrangements are contractually obligated; 2) the total amount paid under the aggregate of all profit sharing arrangements exceeds the total amount of the underwriting gain for the applicable reinsurance year; or 3) The profit sharing payment is triggered by anything other than whether the approved insurance provider receives an underwriting gain for its whole book of Federally reinsured crop insurance business for the applicable reinsurance year.

We believe RMA intends this section to read: “Profit sharing arrangements WILL be considered compensation
when …….”