§ 1522. Research and development

§ 1522. Research and development

(a) Definition of policy In this section, the term “policy” means a policy, plan of insurance, provision of a policy or plan of insurance, and related materials.

(b) Reimbursement of research, development, and maintenance costs

(1) Research and development payment

(A) In general The Corporation shall provide a payment to an applicant for research and development costs in accordance with this subsection.

(B) Reimbursement

(i) In general An applicant who submits a policy under section 1508(h) of this title shall be eligible for the reimbursement of reasonable research and development costs if the policy is approved by the Board for sale to producers.

(ii) Reasonable costs For the purpose of reimbursing research and development and maintenance costs under this section, costs of the applicant shall be considered reasonable costs if the costs are based on—

(I) for any employees or contracted personnel, wage rates equal to not more than 2 times the hourly wage rate plus benefits, as provided by the Bureau of Labor Statistics for the year in which such costs are incurred, calculated using the formula applied to an applicant by the Corporation in reviewing proposed project budgets under this section on October 1, 2016; and

(II) other actual documented costs incurred by the applicant.

(2) Advance payments

(A) In general Subject to the other provisions of this paragraph, the Board may approve the request of an applicant for advance payment of a portion of reasonable research and development costs prior to submission and approval of the policy by the Board under section 1508(h) of this title.

(B) Procedures The Board shall establish procedures for approving advance payment of reasonable research and development costs to applicants.

(C) Concept proposal As a condition of eligibility for advance payments, an applicant shall submit a concept proposal for the policy that the applicant plans to submit to the Board under section 1508(h) of this title, consistent with procedures established by the Board for submissions under subparagraph (B), including—

(i) a summary of the qualifications of the applicant, including any prior concept proposals and submissions to the Board under section 1508(h) of this title and, if applicable, any work conducted under this section;

(ii) a projection of total research and development costs that the applicant expects to incur;

(iii) a description of the need for the policy, the marketability of and expected demand for the policy among affected producers, and the potential impact of the policy on producers and the crop insurance delivery system;

(iv) a summary of data sources available to demonstrate that the policy can reasonably be developed and actuarially appropriate rates established; and

(v) an identification of the risks the proposed policy will cover and an explanation of how the identified risks are insurable under this subchapter.

(D) Review

(i) Experts If the requirements of subparagraph (B) and (C) are met, the Board may submit a concept proposal described in subparagraph (C) to not less than 2 independent expert reviewers, whose services are appropriate for the type of concept proposal submitted, to assess the likelihood that the proposed policy being developed will result in a viable and marketable policy, as determined by the Board.

(ii) Timing The time frames described in subparagraphs (C) and (D) of section 1508(h)(4) of this title shall apply to the review of concept proposals under this subparagraph.

(E) Approval

(i) In general The Board may approve up to 50 percent of the projected total research and development costs to be paid in advance to an applicant, in accordance with the procedures developed by the Board for the making of the payments, if, after consideration of the reviewer reports described in subparagraph (D) and such other information as the Board determines appropriate, the Board determines that—

(I) the concept, in good faith, will likely result in a viable and marketable policy consistent with section 1508(h) of this title;

(II) at the sole discretion of the Board, the concept, if developed into a policy and approved by the Board, would provide crop insurance coverage—

(aa) in a significantly improved form;

(bb) to a crop or region not traditionally served by the Federal crop insurance program; or

(cc) in a form that addresses a recognized flaw or problem in the program;

(III) the applicant agrees to provide such reports as the Corporation determines are necessary to monitor the development effort;

(IV) the proposed budget and timetable are reasonable, as determined by the Board; and

(V) the concept proposal meets any other requirements that the Board determines appropriate.

(ii) Waiver The Board may waive the 50-percent limitation and, upon request of the submitter after the submitter has begun research and development activities, the Board may approve an additional 25 percent advance payment to the submitter for research and development costs, if, at the sole discretion of the Board, the Board determines that—

(I) the intended policy or plan of insurance developed by the submitter will provide coverage for a region or crop that is underserved by the Federal crop insurance program, including specialty crops; and

(II) the submitter is making satisfactory progress towards developing a viable and marketable policy or plan of insurance consistent with section 1508(h) of this title.

(F) Submission of policy If the Board approves an advanced payment under subparagraph (E), the Board shall establish a date by which the applicant shall present a submission in compliance with section 1508(h) of this title (including the procedures implemented under that section) to the Board for approval.

(G) Final payment

(i) Approved policies If a policy is submitted under subparagraph (F) and approved by the Board under section 1508(h) of this title and the procedures established by the Board (including procedures established under subparagraph (B)), the applicant shall be eligible for a payment of reasonable research and development costs in the same manner as policies reimbursed under paragraph (1)(B), less any payments made pursuant to subparagraph (E).

(ii) Policies not approved If a policy is submitted under subparagraph (F) and is not approved by the Board under section 1508(h) of this title, the Corporation shall—

(I) not seek a refund of any payments made in accordance with this paragraph; and

(II) not make any further research and development cost payments associated with the submission of the policy under this paragraph.

(H) Policy not submitted If an applicant receives an advance payment and fails to fulfill the obligation of the applicant to the Board by not submitting a completed submission without just cause and in accordance with the procedures established under subparagraph (B)) 11 So in original. The second closing parenthesis probably should not appear., including notice and reasonable opportunity to respond, as determined by the Board, the applicant shall return to the Board the amount of the advance plus interest.

(I) Repeated submissions The Board may prohibit advance payments to applicants who have submitted—

(i) a concept proposal or submission that did not result in a marketable product; or

(ii) a concept proposal or submission of poor quality.

(J) Continued eligibility A determination that an applicant is not eligible for advance payments under this paragraph shall not prevent an applicant from reimbursement under paragraph (1)(B).

(K) Waiver for hemp The Board may waive the viability and marketability requirements under this paragraph in the case of research and development relating to a policy to insure the production of hemp.

(3) Marketability

(A) In general Subject to subparagraph (B), the Corporation shall approve a reimbursement under paragraph (1) only after determining that the policy is marketable based on a reasonable marketing plan, as determined by the Board.

(B) Waiver for hemp The Corporation may waive the marketability requirement under subparagraph (A) in the case of research and development relating to a policy to insure the production of hemp.

(4) Maintenance payments

(A) Requirement The Corporation shall reimburse maintenance costs associated with the annual cost of underwriting for a policy described in paragraph (1).

(B) Duration Payments with respect to maintenance costs may be provided for a period of not more than four reinsurance years subsequent to Board approval for payment under this subsection.

(C) Options for maintenance On the expiration of the 4-year period described in subparagraph (B), the applicant responsible for maintenance of the policy may—

(i) maintain the policy and charge a fee to approved insurance providers that elect to sell the policy under this subsection; or

(ii) transfer responsibility for maintenance of the policy to the Corporation.

(D) Fee

(i) Amount Subject to approval by the Board, the amount of the fee that is payable by an approved insurance provider that elects to sell the policy shall be an amount that is determined by the applicant maintaining the policy.

(ii) Approval The Board shall approve the amount of a fee determined under clause (i) for maintenance of the policy unless the Board determines that the amount of the fee—

(I) is unreasonable in relation to the maintenance costs associated with the policy; or

(II) unnecessarily inhibits the use of the policy.

(iii) Review After the Board approves the amount of a fee under clause (ii), the fee shall remain in effect and not be reviewed by the Board unless—

(I) the applicant petitions the Board for reconsideration of the fee;

(II) a substantial change is made to the policy, as determined by the Board; or

(III) there is substantial evidence that the fee is inhibiting sales or use of the policy, as determined by the Board.

(5) Treatment of payment Payments made under this subsection for a policy shall be considered as payment in full by the Corporation for the research and development conducted with regard to the policy and any property rights to the policy.

(6) Reimbursement amount The Corporation shall determine the amount of the payment under this subsection for an approved policy based on the complexity of the policy and the size of the area in which the policy or material is expected to be sold.

(c) Research and development authority

(1) Authority The Corporation may conduct activities or enter into contracts to carry out research and development to maintain or improve existing policies or develop new policies to—

(A) increase participation in States in which the Corporation determines that—

(i) there is traditionally, and continues to be, a low level of Federal crop insurance participation and availability; and

(ii) the State is underserved by the Federal crop insurance program;

(B) increase participation in areas that are underserved by the Federal crop insurance program; and

(C) increase participation by producers of underserved agricultural commodities, including specialty crops.

(2) Underserved agricultural commodities and areas

(A) Authority The Corporation may conduct research and development or enter into contracts under procedures prescribed by the Corporation with qualified persons to carry out research and development for policies that promote the purposes of paragraph (1).

(B) Consultation Before conducting research and development or entering into a contract under subparagraph (A), the Corporation shall consult with groups representing producers of agricultural commodities that would be served by the policies that are the subject of the research and development.

(3) Qualified persons A person with experience in crop insurance or farm or ranch risk management (including a college or university, an approved insurance provider, and a trade or research organization), as determined by the Corporation, shall be eligible to enter into a contract with the Corporation under this subsection.

(4) Types of contracts A contract under this subsection may provide for research and development regarding new or expanded policies, including policies based on adjusted gross income, cost-of-production, quality losses, and an intermediate base program with a higher coverage and cost than catastrophic risk protection.

(5) Use of resulting policies The Corporation may offer any policy developed under this subsection that is approved by the Board after expert review in accordance with section 1505(e) of this title.

(6) Research and development priorities The Corporation shall establish as one of the highest research and development priorities of the Corporation the development of policies that increase participation by producers of underserved agricultural commodities, including sweet sorghum, biomass sorghum, rice, peanuts, sugarcane, alfalfa, pennycress, dedicated energy crops, and specialty crops.

(7) Whole farm diversified risk management insurance plan

(A) In general Unless the Corporation approves a whole farm insurance plan, similar to the plan described in this paragraph, to be available to producers for the 2016 reinsurance year, the Corporation shall conduct activities or enter into contracts to carry out research and development to develop a whole farm risk management insurance plan, with a liability limitation of $1,500,000, that allows a diversified crop or livestock producer the option to qualify for an indemnity if actual gross farm revenue is below 85 percent of the average gross farm revenue or the expected gross farm revenue that can reasonably be expected of the producer, as determined by the Corporation.

(B) Eligible producers The Corporation shall permit producers (including direct-to-consumer marketers and producers servicing local and regional and farm identity-preserved markets) who produce multiple agricultural commodities, including specialty crops, industrial crops, livestock, and aquaculture products, to participate in the plan developed under subparagraph (A) in lieu of any other plan under this subchapter.

(C) Diversification The Corporation may provide diversification-based additional coverage payment rates, premium discounts, or other enhanced benefits in recognition of the risk management benefits of crop and livestock diversification strategies for producers that—

(i) grow multiple crops; or

(ii) may have income from the production of livestock that uses a crop grown on the farm.

(D) Market readiness The Corporation may include coverage for the value of any packing, packaging, or any other similar on-farm activity the Corporation determines to be the minimum required in order to remove the commodity from the field.

(E) Review of modifications to improve effectiveness

(i) In general Not later than 18 months after December 20, 2018—

(I) the Corporation shall hold stakeholder meetings to solicit producer and agent feedback; and

(II) the Board shall—

(aa) review procedures and paperwork requirements on agents and producers; and

(bb) modify procedures and requirements, as appropriate, to decrease burdens and increase flexibility and effectiveness.

(ii) Factors In carrying out items (aa) and (bb) of subclause (i)(II), the Board shall consider—

(I) removing caps on nursery and livestock production;

(II) allowing a waiver to expand operations, especially for small and beginning farmers;

(III) minimizing paperwork for producers and agents;

(IV) implementing an option for producers with less than $1,000,000 in gross revenue that requires significantly less paperwork and recordkeeping;

(V) developing and using alternative records such as time-stamped photographs or technology applications to document planting and production history;

(VI) treating the different growth stages of aquaculture species as separate crops to recognize the difference in perils at different phases of growth;

(VII) moderating the impacts of disaster years on historic revenue, such as—

(aa) using an average of the historic and projected revenue;

(bb) counting indemnities as historic revenue for loss years;

(cc) counting payments under section 7333 of this title as historic revenue for loss years; or

(dd) using an assigned yield floor similar to the limitation described in section 1508(g)(6)(A)(i) of this title, as determined by the Secretary;

(VIII) improving agent training and outreach to underserved regions and sectors such as small dairy farms; and

(IX) providing coverage and indemnification of insurable losses—

(aa) after the losses exceed the deductible; and

(bb) up to the maximum amount of total coverage.

(8) Relation to limitations A policy developed under this subsection may be prepared without regard to the limitations of this subchapter, including—

(A) the requirement concerning the levels of coverage and rates; and

(B) the requirement that the price level for each insured agricultural commodity must equal the expected market price for the agricultural commodity, as established by the Board.

(9) Tropical storm or hurricane insurance

(A) In general The Corporation shall carry out research and development, or offer to enter into 1 or more contracts with 1 or more qualified persons to carry out research and development, regarding a policy to insure crops (including tomatoes, peppers, and citrus) against losses due to a tropical storm or hurricane.

(B) Research and development Research and development under subparagraph (A) shall—

(i) evaluate the effectiveness of risk management tools for a low frequency and catastrophic loss weather event; and

(ii) result in a policy that provides protection for at least 1 of the following:

(I) Production loss.

(II) Revenue loss.

(C) Report Not later than 1 year after December 20, 2018, the Corporation shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes—

(i) the results of the research and development carried out under this paragraph; and

(ii) any recommendations with respect to those results.

(10) Quality loss

(A) In general The Corporation shall carry out research and development, or offer to enter into 1 or more contracts with 1 or more qualified persons to carry out research and development, regarding the establishment of each of the following alternative methods of adjusting for quality losses:

(i) A method that does not impact the actual production history of a producer.