Section 400.705 - Contents for new and changed 508(h) submissions, concept proposals, and index-based weather plans of insurance(a) A complete 508(h) submission must contain the following material, as applicable, submitted in accordance with § 400.703(b) . A complete 508(h) submission must be a viable and marketable insurance product that protects the interests of producers, is actuarially appropriate and ensures program integrity. The material must contain adequate information as required in this section, that is presented clearly to ensure the Board and RMA can determine whether RMA and the delivery system have the resources to implement, administer, and deliver the 508(h) submission effectively and efficiently. Calculations, procedures and methodologies must be consistent throughout the submission and appropriate for the commodity and the risks covered.(b) The first section will contain general information numbered as follows (1, 2, 3, etc.), including, as applicable:(1) The applicant's name(s), address or primary business location, phone number, and email address;(2) The type of 508(h) submission (see § 400.704 ) and a notation of whether or not the 508(h) submission was approved by the Board as a concept proposal;(3) A statement of whether the applicant is requesting:(iv) Reimbursement for research and development costs, as applicable and, if the 508(h) submission was previously submitted as a concept proposal, the amount of the advance payment for expected research and development costs; or(v) Reimbursement for expected maintenance costs, if applicable;(4) The proposed agricultural commodities to be covered, including types, varieties, and practices covered by the 508(h) submission;(5) The crop or insurance year and reinsurance year in which the 508(h) submission is proposed to be available for purchase by producers;(6) The proposed sales closing date, if applicable, or the sales window or the earliest date the applicant expects to release the product to the public;(7) The proposed states and counties where the plan of insurance is proposed to be offered;(8) Any known or anticipated future expansion plans;(9) Identification, including names, addresses, telephone numbers, and email addresses, of the person(s) responsible for:(i) Addressing questions regarding the policy, underwriting rules, loss adjustment procedures, rate and price methodologies, data processing and record-keeping requirements, and any other questions that may arise in implementing or administering the program if it is approved; and(ii) Annual reviews to ensure compliance with all requirements of the Act, this subpart, and any agreements executed between the applicant and FCIC;(10) A statement of whether the 508(h) submission will be filed with the applicable office responsible for regulating insurance in each state proposed for insurance coverage, and if not, reasons why the 508(h) submission will not be filed for review; and(11) A statement of whether the submitter wants the 508(h) submission to remain confidential.(c) The second section must contain the benefits of the plan, including, as applicable, a summary that includes: (1) How the 508(h) submission offers coverage or other benefits not currently available from existing public or private programs;(2) How the 508(h) submission meets public policy goals and objectives consistent with the Act and other laws, as well as policy goals supported by USDA and the Federal Government; and(3) A detailed description of the coverage provided by the 508(h) submission and its applicability to all producers, including targeted producers.(d) Except as provided in this section, the third section must contain the policy, that is clearly written in plain language in accordance with the Plain Writing Act of 2010 (5 U.S.C. 301 ) such that producers will be able to understand the coverage being offered. The policy language permits actuaries to form a clear understanding of the payment contingencies for which they will set rates. The policy language does not encourage an excessive number of disputes or legal actions because of misinterpretations. (1) If the 508(h) submission involves a new insurance policy or plan of insurance:(i) All applicable policy provisions; and(ii) A list of any additional coverage that may be elected by the insured in conjunction with the 508(h) submission such as applicable endorsements (include a description of the coverage and how such coverage may be obtained).(2) If the 508(h) submission involves a change to a previously approved policy, plan of insurance, or rates of premium, the proposed revisions, rationale for each change, data and analysis supporting each change, the impact of each change, and the impact of all changes in aggregate.(e) The fourth section must contain the following:(1) Potential impacts the 508(h) submission may have on producers both where the new plan will and will not be available (include both positive and negative impacts) and if applicable, the reasons why the 508(h) submission is not being proposed for other areas producing the commodity;(2) The amount of commodity (acres, head, board feet, etc.), the amount of production, and the value of each agricultural commodity proposed to be covered in each proposed county and state;(3) A reasonable estimate of the expected number of potential buyers, liability and premium for each proposed county and state, total expected liability and premium by crop year based on the detailed assessment of producer interest, including a description of the number of producers involved in the development of the product, their level of participation, their type of participation, how many producers have provided data to assist the submitter in the development of the product, and a comparison with other similar products, including differences between the 508(h) submission and the similar products that may make participation different;(4) If available, any insurance experience for each year and in each proposed county and state in which the policy has been previously offered for sale including an evaluation of the policy's performance and, if data are available, a comparison with other similar insurance policies reinsured under the Act;(5) Market research studies; "market research" is the systematic gathering and interpretation of information about individuals or organizations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making, and that must include:(i) Focus group results (both positive and negative reactions) where a discussion is facilitated amongst a group of stakeholders in order to gain insight into their perceptions, opinions, beliefs, and attitudes towards a product, which must include the number of focus group sessions held, where they were held, when they were held, the number of attendees at each session, the attendees affiliation (producer, agent or other), and specific feedback from the attendees regarding levels of coverage the product should include to cover anticipated risks or perils encountered, the range of costs the producer is willing to pay, what coverages the producers are specifically looking for and an assessment of whether that coverage can be provided at the price the producers are willing to pay, what shortfall or gap in risk protection the product may address, tolerance of risk, perceptions of other similar products, policy features producers may desire, and quality issues;(ii) Other evidence the proposed 508(h) submission will be positively received by producers, agents, lending institutions, and other interested parties, including correspondence from producers, agents, grower organizations, or other stakeholders expressing the need for a certain risk management strategy, desired coverage for perils faced, and willingness to provide critical information for developing a product;(iii) An assessment of factors that could negatively or adversely affect the market and responses from a reasonable representative cross-section of producers or significant market segment to be affected by the policy or plan of insurance; and(iv) For 508(h) submissions proposing products for specialty crops a consultation report must be provided that includes a summary and analysis of discussions with groups representing producers of those agricultural commodities in all major producing areas for commodities to be served or potentially impacted, either directly or indirectly, and the expected impact of the proposed 508(h) submission on the general marketing and production of the crop from both a regional and national perspective including evidence that the 508(h) submission will not create adverse market distortions; and(6) A marketability assessment from the applicant AIP who is part of the applicant and from at least one other AIP. If a marketability assessment is not provided by a separate AIP who is not part of the applicant, the applicant must provide information regarding the names of the persons and AIPs contacted and the basis for their refusal to provide the marketability assessment. The marketability assessment will include: (i) An assessment of whether producers will buy the proposed 508(h) submission;(ii) An assessment of whether AIPs and their agents will want to sell and service the proposed 508(h) submission;(iii) An assessment of the risks associated with the proposed 508(h) submission and its likely effect under the SRA;(iv) Estimated computer system impacts and costs;(v) Estimated administrative and training requirement and costs;(vi) An analysis of the complexity of the product; and(vii) What, if any, efficiency will be gained or potential effects on the workload of AIPs or others participating in the program.(f) The fifth section must contain the information related to the underwriting and loss adjustment of the 508(h) submission, prepared in accordance with the RMA-14050 Risk Management Agency External Standards Handbook located at http://www.rma.usda.gov/handbooks/14000/index.html, including as applicable:(1) An underwriting guide that includes:(i) A table of contents and introduction;(ii) A section containing abbreviations, acronyms, and definitions;(iii) Relevant dates, including as applicable, sales closing, cancellation, termination, earliest planting, final planting, acreage reporting, premium billing, and end of insurance;(iv) A section containing insurance contract information (insurability requirements; producer elections, Crop Provisions not applicable to Catastrophic Risk Protection, specific unit division guidelines, etc.);(v) Detailed rules for determining insurance eligibility, including all producer reporting requirements;(vi) All form standards needed for inspections and producer certifications, plus detailed instructions for their use and completion;(vii) Step-by-step examples of the data and calculations needed to establish the insurance guarantee (liability) and premium per acre or other unit of measure, including worksheets that provide the calculations in sufficient detail and in the same order as presented in the policy to allow verification that the premiums charged for the coverage are consistent with policy provisions;(viii) A section containing any special coverage information (i.e., replanting, tree replacement or rehabilitation, prevented planting, etc.), as applicable; and(ix) A section containing all applicable reference material (i.e., minimum sample requirements, row width factors, etc.).(2) Any statements to be included in the actuarial documents including any intended Special Provisions statements that may change any underlying policy terms or conditions; and(3) The loss adjustment standards handbook for the policy or plan of insurance that includes:(i) A table of contents and introduction;(ii) A section containing abbreviations, acronyms, and definitions;(iii) A section containing insurance contract information (insurability requirements; Crop Provisions not applicable to catastrophic risk protection; specific unit division guidelines, if applicable; notice of damage or loss provisions; quality adjustment provisions; etc.);(iv) A detailed description of the causes of loss covered by the policy or plan of insurance and any causes of loss excluded;(v) A section that thoroughly explains appraisal methods, if applicable;(vi) Illustrative samples of all the applicable forms needed for insuring and adjusting losses in regards to the 508(h) submission in a format compatible with the Document and Supplemental Standards Handbook (FCIC 24040) located at http://www.rma.usda.gov/handbooks/24000/index.html, plus detailed instructions for their use and completion;(vii) Instructions, step-by-step examples of calculations used to determine indemnity payments for all probable situations where a partial or total loss may occur, and loss adjustment procedures that are necessary to establish the amounts of coverage and loss;(viii) A section containing any special coverage information (i.e., replanting, tree replacement or rehabilitation, prevented planting, etc.), as applicable; and(ix) A section containing all applicable reference material (i.e., minimum sample requirements, row width factors, etc.).(g) The sixth section must contain information related to prices and rates of premium, including, as applicable: (1) A detailed description of the premium rating methodology proposed to be used and the basis for selection of the rating methodology;(2) A list of all assumptions made in the premium rating and commodity pricing methodologies, and the basis for these assumptions;(3) A detailed description of the pricing and rating methodologies, including:(i) Supporting documentation needed for the rate methodology;(ii) All mathematical formulas and equations;(iii) Data and data sources used in determining rates and prices and a detailed assessment of the data (including availability, access, long term reliability, and the percentage of the total commercial production that the available data represents) and how it supports the proposed rates and prices;(iv) A detailed explanation of how the rates account for each of the risks covered by the policy; and(v) A detailed explanation of how the prices are applicable to the policy;(4) An example of both a rate calculation and a price calculation;(5) A discussion of the applicant's objective evaluation of the accuracy of the data, the short and long term availability of the data, and how the data will be obtained (if the data source is confidential or proprietary explain the cost of obtaining the data); and(6) An analysis of the results of simulations or modeling showing the performance of proposed rates and commodity prices, as applicable, based on one or more of the following (Such simulations must use all years of experience available to the applicant and must reflect both partial losses and total losses): (i) A recalculation of total premium and losses compared to a similar or comparable insurance plan offered under the authority of the Act with modifications, as needed, to represent the components of the 508(h) submission;(ii) A simulation that shows liability, premium, indemnity, and loss ratios for the proposed insurance product based on the probability distributions used to develop the rates and commodity prices, as applicable, including sensitivity tests that demonstrate price or yield extremes, and the impact of inappropriate assumptions; or(iii) Any other comparable simulation that provides results indicating both aggregate and individual performance of the 508(h) submission including expected liability, premium, indemnity, and loss ratios for the proposed insurance product, under various scenarios depicting good and poor actuarial experience.(h) The seventh section must contain the following: (1) A statement certifying that the submitter and any approved insurance provider or its affiliates will not solicit or market the 508(h) submission until after all policy materials are released to the public by RMA, unless otherwise specified by the Board;(2) An explanation of any provision of the policy not authorized under the Act and identification of the portion of the rate of premium due to these provisions; and(3) Agent and loss adjuster training plans, except for 508(h) submissions proposing only changes to rates of premium to an existing policy.(i) The eighth section must contain a statement from the submitter that, if the 508(h) submission is approved, the submitter will work with RMA and its computer programmers as needed to assure an effective and efficient implementation process. This section must also contain a description of any expected implementation or administration issues. The applicant must consult with RMA prior to providing the 508(h) submission to determine whether or not the 508(h) submission can be effectively and efficiently implemented and administered through the current information technology systems and that all reporting requirements, terminology, and dates conform to USDA standards and initiatives. (1) If FCIC approves the 508(h) submission and determines that its information technology systems have the capacity to implement and administer the 508(h) submission, the applicant must provide a document detailing acceptable computer processing requirements consistent with those used by RMA as shown on the RMA Web site in the Appendix III/M-13 Handbook. This information details the acceptable computer processing requirements in a manner consistent with that used by RMA to facilitate the acceptance of producer applications and related data.(2) Any computer systems, requirements, code and software must be consistent with that used by RMA and comply with the standards established in Appendix III/M-13 Handbook, or any successor document, of the SRA or other reinsurance agreement as specified by FCIC.(3) These requirements are available from the USDA/Risk Management Agency, 2312 East Bannister Road, Kansas City, MO 64131-3011, or on RMA's Web site at http://www.rma.usda.gov/data/m13, or a successor Web site.(j) The ninth section submitted on separate pages and in accordance with § 400.712 and any applicable Board procedures must specify:(1) The following amounts, which may be limited to the amount originally estimated in the submission, unless the applicant can justify the additional costs: (i) For new products, the amount received for an advance payment, and a detailed estimate of the total amount of reimbursement for research and development costs; or(ii) For products that are within the maintenance period, an estimate for maintenance costs for the year that the 508(h) submission will be effective; and(2) A detailed estimate of maintenance costs for future years of the maintenance period and the basis that such maintenance costs will be incurred, including, but not limited to: (i) Any anticipated expansion;(ii) Anticipated changes or updates to policy materials;(iii) The generation of premium rates;(iv) The determination of prices; and(v) Any other costs that the applicant anticipates will be requested for reimbursement of maintenance costs or expenses;(k) The tenth section must contain executed (signed) certification statements in accordance with the following: (1) "{Applicant's Name} hereby claim that the basis and amounts set forth in this section and § 400.712 are correct and due and owing to {Applicant's Name} by FCIC under the Federal Crop Insurance Act"; and(2) "{Applicant Name} understands that, in addition to criminal fines and imprisonment, the 508(h) submission of false or fraudulent statements or claims may result in civil and administrative sanctions."(l) The contents required for concept proposals are found in the Procedures Handbook 17030-Approved Procedures for Submission of Concept Proposals Seeking Advance Payment of Research and Development Costs. In addition, the proposal must provide a detailed description of why the concept provides insurance: (1) In a significantly improved form;(2) To a crop or region not traditionally served by the Federal crop insurance program; or(3) In a form that addresses a recognized flaw or problem in the program;(m) The contents required for index-based weather plans of insurance are found in the Procedures Handbook 17050-Approved Procedures for Submission of Index-based Weather Plans of Insurance. In accordance with the Board approved procedures, the approved insurance provider that submits the index-based weather plan of insurance must provide evidence they have:(1) Adequate experience in underwriting and administering policies or plans of insurance that are comparable to the proposed policy of plan of insurance;(2) Sufficient assets or reinsurance to satisfy the underwriting obligations of the approved insurance provider, and a sufficient insurance credit rating from an appropriate credit rating bureau; and(3) Applicable authority and approval from each State in which the approved insurance provider intends to sell the insurance product.