Revenue Assurance _2001_

Document Sample
Revenue Assurance _2001_ Powered By Docstoc
					Revenue Product Review
Revenue Assurance

•   What is Revenue Assurance?
•   How did the program originate?
•   What crops are covered?
•   How does coverage work?
•   Is it expensive?
                  Revenue Assurance

• Revenue Assurance (RA) provides coverage
  to protect against loss of revenue caused by:
  – Low Prices
  – Low Yields, or
  – A Combination of both.
  Policy Updates/Provision Changes
• Revenue Assurance Program by Crop
  – Barley (feed), Canola/Rapeseed
     • Idaho & North Dakota
  – Corn, Soybeans
     • Arkansas, Colorado, Illinois, Indiana, Iowa, Kansas,
       Kentucky, Michigan, Minnesota, Missouri, North Dakota,
       Ohio, Oklahoma, South Dakota & Tennessee
  – Sunflowers
     • North Dakota
  – Wheat
     • Arkansas, Colorado, Idaho, Indiana, Iowa, Kansas,
       Kentucky, Michigan, Minnesota, Missouri, North Dakota,
       Ohio, Oklahoma, South Dakota & Tennessee
                 Revenue Assurance

• Revenue Assurance (RA) was first proposed
  by the Iowa Farm Bill Study Team in 1995
  as an alternative to the Federal programs
  that were then in place.

• RA is now owned and administered by
  American Farm Bureau Insurance Services,
  Inc.
                  Revenue Assurance

• The objective of RA is to provide a flexible
  and efficient risk management tool to crop
  producers.

• RA recognizes that revenue risk is less than
  the sum of price and yield risk considered
  separately.
  – RA premiums will be less than the combined
    cost of yield and price insurance.
                     Revenue Assurance

• Revenue Assurance Options
  – Producers who operate in different locations in
    a county face lower total yield risk than a
    producer who farms in only one location.
     • RA premiums are adjusted as the number of legally
       defined sections under a single policy increases.
  – Producers who plant multiple crops face lower
    revenue risk than a producer who grows a
    single crop.
     • RA premiums are adjusted if producers insure
                     Revenue Assurance

• Revenue Assurance Options
  – RA has an option that increases revenue
    protection if fall harvest prices are higher than
    projected harvest prices.
                  Revenue Assurance

• Revenue Assurance Options allow each
  individual producer to design a Revenue
  Assurance Policy that meets their particular
  needs and risk management objectives.



• How do we begin?
                   Revenue Assurance
• Let’s first remember that the coverage and
  exclusions of Revenue Assurance are
  similar to those for the standard Multiple
  Peril Crop Insurance (MPCI) APH policy.

• Can I have both policies in force for the
  same crop, same acreage?
  – NO!
  – Revenue Assurance is an alternative choice
    for MPCI APH policies.
                      Revenue Assurance

• How do the policies differ?
  – MPCI APH provides coverage for loss of
    production.

  – Revenue Assurance provides coverage to
    protect against loss of revenue caused by low
    prices or low yields or a combination of both.
     • Revenue assurance has available the fall harvest
       price option, which uses the greater of the fall
       harvest price or the projected harvest price to
       determine the per-acre revenue guarantee.
                       Revenue Assurance
• Let’s first establish the farmer’s guarantee.
  – Revenue Assurance guarantees are based on a
    farmer’s expected per acre revenue. This
    process is based upon:
     • Approved Yields
        – Established using standard APH rules, and
     • Projected Harvest Prices


  – The procedures used to calculate available
    revenue guarantees vary by the selected unit
    structure.
                    Revenue Assurance
• Now we must establish the Projected
  Harvest Price.
  – How?

  – The projected harvest price is the price used to
    determine the expected per-acre revenue and
    the per-acre revenue guarantee at the time of
    sale.
                      Revenue Assurance
• Projected Harvest Price.
  – For Corn
     • The simple average of the final daily settlement prices
       in February for the Chicago Board of Trade (CBOT)
       December corn futures contract.
  – For Soybeans
     • The simple average of the final daily settlement prices
       in February for the Chicago Board of Trade (CBOT)
       November soybean futures contract.
                      Revenue Assurance
• Projected Harvest Price.
  – For Spring Wheat
     • The simple average of the final daily settlement prices
       in February for the MGE September hard red spring
       wheat futures contract.
     • NOTE: DURUM WHEAT CAN BE INSURED AS
       HARD RED SPRING WHEAT!
                      Revenue Assurance
• Projected Harvest Price.
  – For Winter Wheat
     • Arkansas, Colorado, Iowa, Kansas, Missouri,
       Oklahoma, South Dakota
     • The simple average of the final daily settlement prices
       from August 15th to September 14th for the following
       year Kansas City Board of Trade (KCBOT) July hard
       red winter wheat futures contract.
                RA Feed Barley

• Projected harvest price:
  – Used to determine expected per-acre revenue.
  – Simple average of FDSP in Feb. for WCE Oct.
    feed barley futures contract x 0.02177
    (converting WCE price from Canadian dollars
    per metric ton to Canadian dollars per bushel).
     • To convert into U.S. dollars multiply by the simple
       average of FDSP in Feb. on Sept. Canadian dollar
       futures contract on MERC, using current
       U.S./Canadian exchange rate.
  – Released on or before Mar. 5 of current crop
    year.
                  RA Canola
• Projected harvest price:
  – Used to determine expected per-acre revenue.
  – Simple average of FDSP in Feb. for WCE Nov.
    canola futures contract divided by 2,205
    (converting WCE price from Canadian dollars
    per metric ton to Canadian dollars per pound).
     • To convert into U.S. dollars multiply by the simple
       average of FDSP in Feb. on Sept. Canadian dollar
       futures contract on MERC, using current
       U.S./Canadian exchange rate.
  – Released on or before Mar. 5 of current crop
    year.
               RA Sunflower
• Projected harvest price:
  – Used to determine expected per-acre revenue.
     • Simple average of FDSP in Feb. for CBOT Oct.
       soybean oil futures contract divided by 2, then
       subtract 1.
     • Released on or before Mar. 5 of current crop year
                    Revenue Assurance
• We can now determine the farmer’s expected
  per acre revenue.

• Wait!
  – What about unit structure?
     • What’s available for Revenue Assurance?
     • Can we mix Revenue Assurance coverage with other
       MPCI programs?
                      Revenue Assurance
• Revenue Assurance Unit Structure
  – Unit structures available under RA are:
     •   Basic
     •   Optional
     •   Enterprise
     •   Whole Farm


  – All crop acreage in the county must be insured
    under all applicable unit structures.
     • Winter Wheat exception.
                   Revenue Assurance
• Revenue Assurance Unit Structure
  – Winter Wheat Exception

  – Winter Wheat cannot be included under a whole
    farm unit.

  – Winter Wheat can be included under an optional,
    basic or enterprise unit.
                           Revenue Assurance
   • Let’s now determine the farmer’s per-acre
     revenue guarantee.

Unit of Crop   APH Yield   Projected Harvest      Expected
                                Price          Per-Acre Revenue
Corn unit 1      150            $2.50              $375
Corn unit 2      100            $2.50              $250
Soybean unit     40             $6.50              $260
Wheat unit       30             $3.70              $111
                    Revenue Assurance
• What about revenue guarantees for special
  unit structures such as “enterprise” and
  “whole farm?”
  – The expected per acre revenue for an enterprise
    unit is the weighted average of the expected per-
    acre revenues for each of the optional or basic
    units in a county.
  – The weighted average depends on the number of
    acres in each basic or optional unit, adjusted for
    share.
                    Revenue Assurance
• What about revenue guarantees for special
  unit structures such as “enterprise” and
  “whole farm?”
  – The expected per acre revenue for a whole farm
    unit is the weighted average of the expected per-
    acre revenue for each of the optional or basic
    units for all insured crops in the county.
  – The weighted average depends on the number of
    acres in each basic or optional unit, adjusted for
    share.
Revenue Assurance
 • Let’s look at an example
   of how weighted averages
   are calculated within unit
   structures and the
   Expected Per-Acre
   Revenue determination.
                                 Revenue Assurance
                                                Expected Per Acre Revenue
Unit of Crop Acres APH Yield      Share     Basic    Enterprise   Whole Farm
                                              Unit      Unit         Unit
Corn unit 1    100      150        .50       $375      $291.67      $226.17
Corn unit 2    100      100        1.00      $250      $291.67      $226.17
Soybean unit   100       40        .50       $260      $260.00      $226.17
Wheat unit     100       30        1.00      $111      $111.00      $226.17

Corn Enterprise ($375*100*.5) + ($250*100*1.0) = $43,750
   $43,750/((100*.5)+(100*1.0)) = $291.67
Whole Farm($375*100*.5)+($250*100*1.0)+($260*100*.5)+($111*100*1.0)=$67,850
   $67,850/((100*.5)+(100*1.0)+(100*.5)+(100*1.0)) = $226.17
                    Revenue Assurance

• Per-Acre Revenue Guarantee
  – The per-acre revenue guarantee on a basic or
    optional unit is determined by multiplying the
    selected coverage level percent by approved APH
    yield by the projected harvest price.
      Selected                          Projected
                        Approved
      Coverage      X               X    Harvest
                        APH Yield
    Level Percent                         Price
                         Revenue Assurance

  • Per-Acre Revenue Guarantee
      – If the fall harvest price option is selected, the per-
        acre revenue guarantee equals the coverage level
        percent multiplied by the approved yield
        multiplied by the greater of the projected harvest
        price or the fall harvest price.
                                              Greater of:
  Selected      X   Approved
  Coverage                      X     Projected Harvest Price or
                    APH Yield             Fall Harvest Price
Level Percent
                      Revenue Assurance

 • Unit Revenue Guarantee
    – The unit revenue guarantee for a basic or optional
      unit equals the per-acre revenue guarantee,
      multiplied by acres on the unit, multiplied by the
      share.


  Per       X     Unit
  Acre                      X       Share
                  Acres
Guarantee
                      Revenue Assurance

 • Unit Revenue Guarantee
    – The unit revenue guarantee for an enterprise or
      whole farm unit equals the per-acre revenue
      guarantee, multiplied by acres on the unit,
      multiplied by the share.


  Per       X     Total            Share
  Acre                      X
                  Acres          Adjustment
Guarantee
                               Revenue Assurance

      • Unit Revenue Guarantee                              Basic Unit
                             Expected Per Acre                   Unit
                             Revenue Guarantee   Coverage       Revenue
Unit of Crop Acres   Share     Basic Unit         Level        Guarantees
Corn unit 1    100    .50        $375             .75           $14,063
Corn unit 2    100   1.00        $250              .75          $18,750
Soybean unit   100    .50        $260             .75           $ 9,750
Wheat unit     100   1.00        $111             .75           $ 8,325
                    Revenue Assurance

• Unit Revenue Guarantee             Enterprise Unit
  – Corn Enterprise Unit
     • $14,063 + $18,750 = $32,813
  – Soybean Enterprise Unit
     • $9,750
  – Wheat Enterprise Unit
     • $8,325
                        Revenue Assurance

• Unit Revenue Guarantee           Whole Farm Unit
  – Sum all basic unit revenue guarantees.
     • $14,063 + $18,750 + $9,750 + $8,325 = $50,888

     • OR

     • ($266.17) X (.75) X ((100*.5)+(100*1)+(100*.5)+(100*1))
       = $50,888
                      Revenue Assurance

• Unit Revenue Guarantee
  – The expected per-acre revenue for enterprise and
    whole farm units depends on the insured acres
    rather than estimated acres. The final unit
    revenue guarantee can only be computed after the
    insured’s acreage report is complete.
     • The preliminary unit revenue guarantee and premium
       based upon estimated acreage at sales closing date, can
       vary from the final unit revenue guarantee and
       premium based on the completed acreage report data.
                    Revenue Assurance

• Coverage Level Selection
  – The insured may select coverage from the
    following unit structure scenarios.
  – Basic and Optional Units
     • Minimum Coverage Level is 65%.
     • Maximum Coverage Level is 75%.
  – Enterprise and Whole-Farm Units
     • Minimum Coverage Level is 65%.
     • Maximum Coverage Level is 85%.
                     Revenue Assurance

• Unit Indemnity Calculation
  – Let’s now calculate a unit indemnity.
  – What must we first know to begin this process?
     • Calculate the Unit Revenue Guarantee.
     • Secure the Production to Count on each Unit.
     • Secure the Fall Harvest Price for each crop.

     • Let’s do the Math!
                            Revenue Assurance
   • Unit Indemnity Calculation
Unit of Crop   Production      Fall Harvest        Per-Acre
                to Count           Price           Revenue
Corn unit 1      100               $2.10           $210
Corn unit 2      110               $2.10           $231
Soybean unit      40               $6.70           $268
Wheat unit        30               $3.20           $ 96

Have we elected the Fall Harvest Price election?
                                 Revenue Assurance
                                                     Per Acre Revenue
Unit of Crop Acres Production     Share      Basic    Enterprise   Whole Farm
                      to Count                Unit      Unit          Unit
Corn unit 1    100      100        .50       $210      $224.00       $188.66
Corn unit 2    100      110        1.00      $231       $224.00      $188.66
Soybean unit   100       40        .50       $268       $231.00      $188.66
Wheat unit     100       30        1.00      $ 96       $ 96.00      $188.66

Corn Enterprise ($210*100*.5) + ($231*100*1.0) = $33,600
   $33,600/((100*.5)+(100*1.0)) = $224
Whole Farm($210*100*.5)+($231*100*1.0)+($268*100*.5)+($96*100*1.0)=$56,500
   $56,500/((100*.5)+(100*1.0)+(100*.5)+(100*1.0)) = $188.66
                   Revenue Assurance

• Collect and Process Data
  – Let’s review the information we have calculated.


  – What are the Unit Revenue Guarantees assuming
    a 75% coverage level?
                               Revenue Assurance

      • Unit Revenue Guarantee                              Basic Unit
                             Expected Per Acre                   Unit
                             Revenue Guarantee   Coverage       Revenue
Unit of Crop Acres   Share     Basic Unit         Level        Guarantees
Corn unit 1    100    .50        $375             .75           $14,063
Corn unit 2    100   1.00        $250              .75          $18,750
Soybean unit   100    .50        $260             .75           $ 9,750
Wheat unit     100   1.00        $111             .75           $ 8,325
                       Revenue Assurance

• Collect and Process Data
  – Let’s now examine an actual revenue scenario.

  – Actual Revenue for each of the units is as follows:
     •   Corn unit 1 $10,500
     •   Corn unit 2 $23,100
     •   Soybean unit $13,400
     •   Wheat unit $ 9,600
  – How do these numbers compare with the unit
    revenue guarantee?
                             Revenue Assurance

   • Collect and Process Data                     Basic Units
                 Actual            Unit               Paid
Crop          Unit Revenue    Revenue Guarantee      Indemnity
Corn unit 1     $10,500           $14,063             $3,563
Corn unit 2     $23,100           $18,750              $0
Soybean unit $13,400              $ 9,750             $0
Wheat unit      $ 9,600           $ 8,325              $0
                             Revenue Assurance

   • Collect and Process Data               Enterprise Units
                 Actual            Unit              Paid
Crop          Unit Revenue    Revenue Guarantee    Indemnity
Corn unit 1     $10,500           $14,063
Corn unit 2     $23,100           $18,750
                $33,600           $32,813             $0
                             Revenue Assurance

   • Collect and Process Data               Whole Farm Unit
                 Actual            Unit              Paid
Crop          Unit Revenue    Revenue Guarantee    Indemnity
Corn unit 1     $10,500           $14,063
Corn unit 2     $23,100           $18,750
Soybean unit $13,400              $ 9,750
Wheat unit      $ 9,600           $ 8,325              $0
                $56,600           $50,888
                       Revenue Assurance

• How are RA indemnities triggered?
  – Without Fall Harvest Option
     • RA indemnities will be paid if all of the production to
       count times the projected harvest price is less than the
       per-acre revenue guarantee times the number of acres
       (unit guarantee).
  – With Fall Harvest Option
     • RA indemnities will be paid if all of the production to
       count times the, greater of the projected harvest price or
       harvest price, is less than the per-acre revenue guarantee
       times the number of acres (unit guarantee).
                       Revenue Assurance

• Harvest Price Option
  – Remember!
     • If the insured purchases the RA fall harvest price option,
       the revenue assurance guarantee will be based on the
       fall harvest price if the fall harvest price is higher than
       the projected harvest price.
     • Insured must choose the fall harvest price option by
       sales closing date.
     • The option is continuous unless canceled by the crop
       sales closing date.
                       Revenue Assurance

• Harvest Price Option
  – The fall harvest price option is designed to provide
    additional assurance to those producers who
    market their crop before harvest.
     • These producers take on the additional risk that
       harvested bushels will not be sufficient to meet their
       contractual obligation.
     • Shortfalls of this type can have severe consequences if
       the fall harvest prices are greater than projected harvest
       prices because the producer will be forced to purchase
       bushels to meet his/her obligations at the higher
       price.
                      Revenue Assurance

• Harvest Price Option
  – The Revenue Assurance price option provides
    additional coverage when the fall harvest price is
    greater than the projected harvest price.
     • Coverage will allow the producer to fulfill possible
       contractual obligations from Revenue Assurance
       indemnities.
Revenue Assurance


   • How do we determine
     the Harvest Price?
                      Revenue Assurance
• Harvest Price.
  – For Corn
     • The simple average of the final daily settlement prices
       in November for the Chicago Board of Trade (CBOT)
       December corn futures contract.
  – For Soybeans
     • The simple average of the final daily settlement prices
       in October for the Chicago Board of Trade (CBOT)
       November soybean futures contract.
                      Revenue Assurance
• Harvest Price.
  – For Spring Wheat (Including Durum)
     • The simple average of the final daily settlement prices
       in August for the MGE September hard red spring
       wheat futures contract.
     • Prices will be released on or before September 5th.
     • NOTE: DURUM WHEAT CAN BE INSURED AS
       HARD RED SPRING WHEAT!
                      Revenue Assurance
• Harvest Price.
  – For Winter Wheat
     • Arkansas, Colorado, Iowa, Kansas, Missouri,
       Oklahoma, South Dakota
     • The simple average of the final daily settlement prices
       from July 1st to July 14th from the Kansas City Board
       of Trade (KCBOT) July hard red winter wheat futures
       contract.
                  RA Canola
• Fall harvest price:
  – Used to value production to count.
  – Simple average of FDSP in Sep. for WCE Nov.
    canola futures contract divided by 2,205
    (converting WCE price from Canadian dollars
    per metric ton to Canadian dollars per pound).
     • To convert into U.S. dollars multiply by the simple
       average of FDSP in Sept. on Sept. Canadian dollar
       futures contract on MERC, using current
       U.S./Canadian exchange rate.
  – Released on or before Oct. 5.
                RA Feed Barley

• Fall harvest price:
  – Used to value production to count.
  – Simple average of FDSP in Aug. for WCE Oct.
    feed barley futures contract x 0.02177
    (converting WCE price from Canadian dollars
    per metric ton to Canadian dollars per bushel).
     • To convert into U.S. dollars multiply by simple
       average of FDSP in Aug. on Sept. Canadian dollar
       futures contract on MERC, using current
       U.S./Canadian exchange rate.
  – Released on or before Sept. 5.
                   RA Sunflowers

•Fall harvest price:
   •Used to value production to count.
       •Simple average of FDSP in Sep. for CBOT
       Oct. soybean oil futures contract divided by
       2, then subtract 1.
       •Released on or before Oct. 5.
                        Revenue Assurance
• Let’s now look at technical
  policy specifics of Revenue
  Assurance.

• How is it similar to an
  MPCI APH policy?

• How does it differ from
  MPCI APH?
                    Revenue Assurance
• Continuous Policy
  – Revenue Assurance is a continuous policy and
    provides coverage for succeeding years unless
    canceled by the insured or the insurance provider
    at a time specified in the crop provisions.


• Coverage Level
  – The coverage level percentage must be selected
    by sales closing date.
                     Revenue Assurance
• Revenue Assurance Application
  – The application for Revenue Assurance must be
    accepted by the company before coverage begins.
  – The application:
     • Must be completed and filed no later than the sales
       closing date.
     • Must have all the required information.
     • Must be received by Great American no later than 20
       days after the sales closing dates.
                       Revenue Assurance
• Revenue Assurance Application
  – Coverage will not be provided if:
     • For late applications.
     • For ineligible insureds.
     • For ineligible crops.
                       Revenue Assurance
• Revenue Assurance Application
  – Insured must not obtain other like crop insurance
    on his/her share of the insured crop.
  – If company determines that:
     • More than 1 policy on insured’s share is intentional,
       insured may be subject to sanctions.
     • The violation was not intentional, the policy with the
       earliest date of application is in force and all others
       void.
  – The insured may obtain other non federal
    crop insurance.
                      Revenue Assurance
• Revenue Assurance Transfer of Application
  – Insured requesting a change from other FCIC
    reinsured product to RA within the Great
    American must:
     • Complete the RA application
     • Attach signed request to cancel existing coverage OR

     • Use the Application/Renewal Policy Change Form
        – New system generated form.
                     Revenue Assurance
• Revenue Assurance Restrictions
  – Land that is not rated for MPCI APH is not
    available for Revenue Assurance coverage.
  – Hail and fire exclusions are not an option for
    Revenue Assurance.
  – Any discounts for good experience available for
    MPCI APH are not available for Revenue
    Assurance.
     • Experience history is suspended and maintained by the
       company for future use.
                       Revenue Assurance
• Revenue Assurance Restrictions
  – Crop will not be insured if:
     • Farming practices are not in accordance with rates.
     • They are not of a type, class, or variety adapted to area.
     • It is a volunteer crop.
     • It is a second crop following the same crop.
     • Planted for development or production of hybrid seed
       or for experimental purposes; or
     • Use solely for wildlife protection/management.
                    Revenue Assurance
• Insurance Deadline
  – The latest date to submit a Revenue Assurance
    application is the sales closing date.
  – SPRING
     • March 15th
  – FALL
     • September 30th
                     Revenue Assurance
• Insurance Period
  – Begins on each unit or part of unit at the latest
    date represented by:
     • Great American accepting the insurance application.
     • Insured crop is planted.
     • Date within crop provisions.
                         Revenue Assurance
• Insurance Period
  – Ends on each unit or part of unit at the earliest
    date represented by:
     •   The total destruction of the insured crop on the unit.
     •   The harvest of the unit.
     •   The final adjustment of loss on the unit.
     •   The calendar date in the crop provisions.
     •   Abandonment of the crop on the unit, or
     •   As otherwise specified in the crop provisions.
                     Revenue Assurance
• Premium Subsidy
  – The producer premium subsidy will depend on
    the coverage level percent.
    • The coverage level percent is determined by dividing
      the per-acre revenue guarantee by the expected per
      acre revenue, rounded to the hundredths for enterprise
      or whole-farm units.
                       Revenue Assurance
• Premium Subsidy
  – If the coverage level percent is:
     • Greater than or equal to .65 but less than .75
        – Then the premium subsidy factor is .59.
     • Greater than or equal to .75 but less than .80
        – Then the premium subsidy factor is .55.
     • Greater than or equal to .80 but less than .85
        – Then the premium subsidy factor is .48.
     • Greater than or equal to .85
        – Then the premium subsidy factor is .38.
                   Revenue Assurance
• Production to Count
  – Production to count is the measurement (crop unit
    measurement such as bushels for corn) of the crop
    harvested and/or unharvested appraised
    production from the acreage in the unit.
                    Revenue Assurance
• APH Reporting
  – Revenue Assurance uses the same acreage
    reporting requirements as the APH program. The
    producer must report APH information by the
    earlier of the acreage reporting or forty-five days
    after the cancellation date.
  – The acreage reporting date is established in the
    actuarial documents for each county for the
    current crop year.
                   Revenue Assurance
• Acreage Reporting
  – An acreage report similar to that required for
    MPCI is required for the premium and per-acre
    revenue guarantee to be determined.
                      Revenue Assurance
• Acreage Reporting
  – Must include the following information.
     • All insurable/uninsurable acreage of crop in county in
       which the insured has a share.
     • Insured’s share at time coverage begins.
     • Practice
     • Type
     • Unit Structure and
     • Plant Date
                      Revenue Assurance
• Acreage Reporting
  – For Whole-Farm units:
     • The insured must report each optional/basic unit that
       comprises the whole-farm unit.

     • If the insured does not qualify for enterprise or whole-
       farm units when the acreage is reported, the company
       will assign the basic unit structure.
                      Revenue Assurance
• Acreage Reporting
  – Zero acres planted
     • If the insured does not have a share in an insured crop
       in the county for the crop year, he/she must submit an
       Acreage Report on or before the Acreage Reporting
       Date indicating zero acres planted.
                        Revenue Assurance
• Acreage Reporting                             Not Submitted
  – If the acreage report is not submitted by the
    acreage reporting date, or the insured fails to
    report all units, company may:
     • Determine by unit the insurable crop acreage, share,
       type and practice; or
     • Deny liability on such units
        – Insured’s share of production from unreported units is, for
          loss purposes, allocated to reported units (but not to PP
          acreage, will not affect PP payment).
                    Revenue Assurance
• Premium Due Date
  – Premium for RA is due on the same date as an
    MCPI APH policy. The premium billing dates
    will be contained in the crop special provisions.
                      Revenue Assurance
• Insurable Irrigated Acreage
  – If and irrigated practice rate is provided, the
    insured must report as “irrigated only” (IRR)
    acreage with:
     • Adequate facilities; and
     • Adequate water, or reasonable expectation of such.
  – If acreage is irrigated and no irrigated rate is
    provided, the insured may
     • Report and insure irrigated acreage as “NI” or
     • Report irrigated acreage as not insured.
                        Revenue Assurance
• Uninsurable Acreage
  – Acreage that is not insurable is acreage that has
    not been planted and harvested within one of the
    three previous crop years, unless:
     •   To comply with any other USDA program.
     •   Because of crop rotation.
     •   Due to insurable cause of loss that prevented it; or
     •   Because a perennial tree/vine/bush was grown on the
         acreage.
                        Revenue Assurance
• Uninsurable Acreage
  – Acreage that is no insurable is acreage:
     •   That has been strip-mined.
     •   Is damaged, but not replanted.
     •   Is interplanted, unless allowed by crop provisions.
     •   Is restricted by crop provisions/special provisions; or
     •   Is planted in any manner other than as specified in the
         provisions.
                       Revenue Assurance
• Written Agreements
  – Insured must apply in writing no later than the
    sales closing date unless:
     • Insured is physically unable to apply prior to the sales
       closing date.
     • Great American accepts after inspection.
  – Written agreements will be accepted for land risks
    only.
  – Additional crops, crop types, or practices are not
    acceptable as applications for written
    agreements.
                     Revenue Assurance
• High Risk Land
  – High Risk Land may be insured under the RA
    policy.
    • High risk map area factors must be utilized in the
      actuarial documents.
                    Revenue Assurance
• High Risk Land and Catastrophic Coverage
  – If the insured chooses a high risk land exclusion
    option endorsement, the insured may insure the
    high risk land under an MPCI CAT policy with
    the same company.
  – If the insured chooses both an RA policy and a
    CAT policy for a crop, the acres insured under
    each policy will be considered as a separate
    policy.
                   Revenue Assurance
• High Risk Land and Catastrophic Coverage
  – The administrative fee for each policy is
    applicable.
  – The application for this endorsement must be
    completed by the sales closing date and submitted
    to the company not later than 20 days after the
    sales closing date.
                    Revenue Assurance
• Revenue Assurance Application
  – An application may be submitted for each county
    or all counties may be insured on one application
    if so designated.


• Replant Payment
  – If replanting is authorized and the policy
    provisions have been met, the crop’s projected
    harvest price will be used in calculating the
    replant payment.
                     Revenue Assurance
• Prevented Planting
  – The rules governing prevented planting are based
    on MPCI APH rules with one exception.
     • Prevented planting payments under MPCI APH are
       based on a guaranteed yield level whereas RA
       payments are based on a per acre revenue guarantee.
     • The applicable RA price used to compute the per acre
       revenue guarantee is used to determine the prevented
       planting payment.
                   Revenue Assurance
• Prevented Planting
  – MPCI APH, RA, CRC, and IP provide a 60%
    prevented planting guarantee with an option to
    purchase 65% or 70%.
                       Revenue Assurance
• Late Planted Acreage
  – The per-acre revenue guarantee for each acre
    planted to the insured crop during the late
    planting period will be reduced by 1% per day for
    each day planted after the final planting date.
     • The late planting period is the period that begins the
       day after after the final planting date for the insured
       crop and ends 25 days after the final planting date,
       unless otherwise specified in the crop or special
       provisions.
                    Revenue Assurance
• Optional Units
  – Optional units may be elected for Revenue
    Assurance if the producer has APH for each
    optional unit and the optional units are located in
    legally identifiable sections.

  – A 10% surcharge on the unsubsidized premium
    for each optional unit will be assessed.
                   Revenue Assurance
• Enterprise Unit Discounts
  – The Enterprise Unit discount increases with the
    number of different sections in which the
    insured’s RA crop acreage is located, up to a
    maximum of 10 or more sections.
  – The determination of the number of sections will
    be based on the insured’s acreage report.
                       Revenue Assurance
• Whole Farm Unit Discounts
  – Premium discounts exist for Whole Farm units.
  – The insured will receive an additional adjustment
    in addition to the enterprise unit discount.
  – The additional Whole Farm Unit discount
    depends on:
     • The ratio of insured acres of the crops listed on the
       acreage report for the unit.
     • Coverage level.
     • APH yields.
     • Projected harvest prices.
                    Revenue Assurance
• Whole Farm Unit Discounts
  – The insured must enroll all insurable acres of all
    RA spring crops to obtain the Whole Farm
    adjustment.
  – If the insured does not have insurable acres on
    one of these crops in the county, then the
    producer can obtain the Whole Farm adjustment
    on the remaining insurable crops.
     • 2 crop minimum
                        Revenue Assurance
• Volatility of Price
  – The final premium may vary from the quote
    based on the final estimate of the volatility value.
     • A variable required to calculate RA premiums is the
       implicit volatility of prices.
        – This variable measures the risk of price changes.
                      Revenue Assurance
• Notice of Loss Requirements
  – Yield Loss
     • 72 hours after initial discovery of damage.
     • No later than 15 days after the end of the insurance
       period.
  – Revenue Loss
     • No later than 45 days after the date the Fall Harvest
       Price is released.
                    Revenue Assurance
• Final Loss Payments
  – Losses can only be finalized after the Fall Harvest
    Price and the Production to Count have been
    determined.
Revenue Assurance

    Let’s now review a
    Coverage Illustration
    with Loss Examples.
                          Revenue Assurance
Wheat
APH = 100 bushels
Projected Price = $2.85
Expected Per-Acre Revenue = 100 X $2.85 = $285.00
Now include the coverage levels: 75% and 65%
$285.00 X .75 = $213.75
$285.00 X .65 = $185.25
Let’s now select a Per-Acre Revenue Guarantee of $200.00
                           Revenue Assurance
Loss Example #1
Production Loss with Price Increase without Harvest Price Option
Projected Harvest Price $2.85
Fall Harvest Price $3.00
Expected Per Acre Revenue = APH X Projected Harvest Price
      $285.00/acre          = 100 bushels X $2.85
Selected Per-Acre Revenue $200.00/acre Coverage Level .7018
Production to Count X Fall Harvest Price = Harvest Revenue
       50            X          $3.00   = $150.00/acre
                            Revenue Assurance
Loss Example #1
Production Loss with Price Increase without Harvest Price Option
Selected Per-Acre Revenue Guarantee - Harvest Revenue = Loss
Payment
$200.00/acre - $150.00/acre = $50.00 acre


How would the calculation have changed if the Harvest Price Option
had been elected?
                           Revenue Assurance
Loss Example #2
Production Loss with Price Increase with Harvest Price Option
Projected Harvest Price $2.85
Fall Harvest Price $3.00
Expected Per Acre Revenue = APH X Harvest Price
      $300.00/acre          = 100 bushels X $3.00
Selected Per-Acre Revenue $211.00/acre Coverage Level .7018
Production to Count X Fall Harvest Price = Harvest Revenue
       50            X          $3.00   = $150.00/acre
                            Revenue Assurance
Loss Example #2
Production Loss with Price Increase without Harvest Price Option
Selected Per-Acre Revenue Guarantee - Harvest Revenue = Loss
Payment
$211.00/acre - $150.00/acre = $61.00 acre


How would the calculation have changed if the Harvest Price Option
had been elected?
       An additional $11.00 of indemnity per acre or an additional
       22% of loss payment per acre.
                           Revenue Assurance
Loss Example #3
Production Loss with Price Decrease
Projected Harvest Price $2.85    Fall Harvest Price $2.50
Expected Per-Acre Revenue = APH X Projected Harvest Price
        $285.00            = 100 bushels X $2.85
Maximum Expected Per-Acre Revenue Guarantee
       $285.00 X .75 = $213.75
Minimum Expected Per-Acre Revenue Guarantee
       $285.00 X .65 = $185.25
                            Revenue Assurance
Loss Example #3
Production Loss with Price Decrease
Selected Per-Acre Revenue $200.00/acre Coverage Level .7018
Harvest Revenue = Production to Count X Fall Harvest Price
 $125.00/acre     = 50 X $2.50
Selected Per-Acre Revenue Guarantee
 $200.00/acre - $125.00/acre = $75.00 acre
Would the calculation have changed if the Harvest Price Option had
been elected?
                             Revenue Assurance
Loss Example #3
Production Loss with Price Decrease
Would the calculation have changed if the Harvest Price Option had
been elected?


NO!
The Projected Harvest Price is greater than the Harvest Price.
                           Revenue Assurance
Loss Example #4
Revenue Loss
Projected Harvest Price $2.85
Expected Per Acre Revenue = APH X Projected Harvest Price
      $285.00              = $2.85 X 100 bushels
Maximum Expected Per-Acre Revenue
$285.00 X .75 = $213.75
Minimum Expected Per-Acre Revenue
$285.00 X .65 = $185.25
                           Revenue Assurance
Loss Example #4
Revenue Loss
Selected Per-Acre Revenue $200.00/acre       Coverage Level .7018
Harvest Revenue = Production to Count X Fall Harvest Price
   $187.50/acre =   75 bushels X     $2.50
Selected Per-Acre Revenue Guarantee - Harvest Revenue = Loss
           $200/acre - $187.50/acre = $12.50 acre
               Revenue Assurance

• Questions?

				
DOCUMENT INFO