BULLETIN NO.: MGR-98-026 TO: All Reinsured Companies All Risk Management Offices All Other Interested Parties FROM: Kenneth D. Ackerman /s/ 9-24-98 Administrator SUBJECT: Nursery Crop Provisions (99-073) Final Rule BACKGROUND: On September 24, 1998, Federal Crop Insurance Corporation (FCIC) published a final rule for the Nursery Crop Provisions (99-073) for the 1999 and succeeding crop years at 7 CFR 457.162. The following summarizes key provisions of this nursery policy effective for the 1999 crop year: 1. Both field-grown and container-grown nursery plants are insurable if specified in the Eligible Plant List. This list also designates the minimum cold hardiness zone to which specific field-grown plants are insurable and specifies storage requirements for container-grown plants. 2. Sales are permitted through May 31 each year. This allows growers to purchase nursery insurance during most of the year. There is a mandatory 30-day waiting period before coverage can begin. 3. The requirement for detailed inventory reports from all insureds before insurance attaches is eliminated. Instead, policyholders will declare the dollar value of their inventory. However, the maximum liability for the value of insurable plants is provided in the Plant Price Schedule. Growers must exercise caution in declaring their inventory value since individual plant prices may vary substantially and because a crop year deductible is set according to the grower's inventory report and may not be reduced during the year. 4. Premium billing will occur once a year, on or about July 1 of each crop year. 5. Insurable nursery plants may be grouped according to categories commonly recognized in the nursery industry and insured as optional units. Optional units will now be available for deciduous trees, coniferous trees, deciduous shrubs, coniferous shrubs, and nine other generally recognized plant classes. Units are not available on a geographic or share basis. 6. The Peak Inventory Endorsement allows growers to cover temporary increases in inventory without paying a full year's premium. Growers declare the amount of the inventory value increase and the dates the peak coverage begins and ends. The grower pays premium for the whole month for any portion of a month that the Endorsement is in effect. 7. Losses due to frost, freeze, or cold are insurable if growers follow required protection practices stated on the Eligible Plant Listing. Growers whose insurable plants do not have the required cold protection receive coverage from all covered perils except cold damage without the need for a special endorsement. 8. A co-insurance clause is included in the policy that treats under-reported values as retained amounts of risk. Under this clause, if growers under-report their inventory value, any indemnities will be paid in proportion to the inventory values reported but never more than the value declared. 9. Growers may select the percentage of the insurable price they will receive in the event of an indemnity for their nursery plants. Selecting less than 100 percent of the insurable price will lower the premium and the coverage of the policy. This feature gives nursery growers the ability to tailor policy coverage to their individual needs. 10. Coverage is provided for plants that produce fruit or nuts as long as the fruit or nuts are not intended for harvest while the plant is in the nursery. This allows nursery growers who provide plants for orchards and groves to insure their nursery products. ACTION: The Nursery Crop Provisions (99-073) must be administered as follows: 1. Growers who have nursery policy (96-056) in effect on October 1, 1998, will be allowed to convert their insurance coverage to nursery policy (99-073) through November 30, 1998. Growers who elect this option must simultaneously discontinue nursery policy (96-056) and apply for nursery policy (99-073). These growers will not have a waiting period for coverage of their container-grown plants even if they change their price percentage election, provided they do not change their coverage level election. If a grower chooses a different coverage level, the 30-day waiting period will apply, in which case coverage under nursery policy (96-056) would remain in effect until the end of the 30-day waiting period. 2. The 30-day waiting period applies to coverage for both field grown and container grown nursery plants for new insureds and to coverage on all field-grown nursery plants for current insureds who convert to nursery policy (99-073). 3. Any premium paid for coverage under nursery policy (96-056) in effect as of October 1, 1998, will be credited to the premium due for nursery policy (99-073). 4. Growers who want to insure field-grown nursery plants must insure all insurable nursery plants, both field-grown and container-grown, under nursery policy (99-073). 5. Any losses that may occur during the time nursery policy (96-056) is in effect will be paid using the terms and conditions of that policy. 6. Nursery policy (96-056) will be withdrawn for the 2000 crop year, and all growers wanting crop insurance must use nursery policy (99-073). 7. Nursery policy (99-073) will be reinsured under the Standard Reinsurance Agreement (SRA) as follows: a. The buy-up (B) or CAT (C) gain/loss parameters described in section II.C. and D. will apply, as appropriate. b. Administrative and operating subsidy will be paid at the "all other" rate of 24.5 percent, per Amendment No.1, section III.A.2.e. c. Sales of first-year coverage under nursery policy (99-073) are permitted each year up to May 31. For the second and subsequent years the policy is in force, the sales closing date will be September 30, with coverage beginning on October 1 and continuing until the following September 30. Reinsurance year for nursery policy (99-073) will be determined by the September 30 date for continuing policies or the application date for first-year policies. d. Designation of policies to the assigned risk and developmental fund will be made according to section II.B.1. and 2. of the SRA. Because sales of nursery policy (99-073) may occur during much of the year, the following additional guidelines are provided: i. For the 1999 reinsurance year, all eligible crop insurance contracts will be considered as new for reinsurance purposes even though some may cover continuing insureds or "roll-overs" from existing contracts. Designations to either the assigned risk or the developmental fund must be made not later than the transaction cut-off date for the week including the 30th calendar day after the later of September 30 or the date that the new application was signed. ii. For 2000 and subsequent reinsurance years, policies may be designated to the assigned risk fund as follows: (1) For carryover crop insurance contracts--not later than the transaction cut-off date for the week including the 30th calendar day after the sales closing date, which is September 30 for carryover contracts. (2) For all other eligible crop insurance contracts--not later than the transaction cut-off date for the week including the 30th calendar day after the later of September 30 or the date that the new application was signed. iii. For 2000 and following reinsurance years, policies may be designated to the developmental fund as follows: (1) For carryover crop insurance contracts--not later than the transaction cut-off date for the week containing August 1 of the reinsurance year. (2) For all other eligible crop insurance contracts--not later than the transaction cut-off date for the week including the 30th calendar day after the later of September 30 or the date that the new application was signed. DISPOSAL DATE: December 31, 2000