Guidance for Updating the SRA Appendix IV Review Matrix
This document establishes the guidance that will be generally followed to update the Standard
Reinsurance Agreement (SRA) Appendix IV Review Matrix when new plans of insurance and
endorsements are introduced. The guidance reflects the rationale and criteria used to construct
the Review Matrix as published in informational memorandum COM-17-003.
The Review Matrix will be updated as needed to reflect the introduction of new plans of
insurance and endorsements, or if the Appendix IV review requirements are changed. It is
expected that most new insurance products (policies and endorsements) will readily be placed
into existing categories of the Review Matrix, e.g., an extension of the Actual Production History
plan of insurance to a new crop. Thus, updates will probably be relatively infrequent
occurrences. F
Any questions regarding application of the review and inspection requirements for new or
existing insurance products, this guidance, or the Review Matrix, should be directed to Kent
Lanclos, Director – Business Analytics Division, by phone 202-205-3933 or by email
QUALITY CONTROL REVIEWS
Per SRA Appendix IV, section III(b), approved insurance providers (AIPs) are responsible for
conducting reviews of eligible crop insurance contracts (ECICs) as described below in order to
ensure the effectiveness of the company’s internal controls and assure that program integrity is
maintained.
Data Mining Reviews: RMA uses data mining to detect ECICs for which the experience is
anomalous relative to some peer group. Any ECIC or endorsement is potentially subject to a
Data Mining Review if individual loss adjustment is required to determine the amount of the
loss. ECICs and endorsements based on index or area insurance concepts (e.g., Rainfall Index,
Area Risk Protection) are, in general, not subject to Data Mining Reviews because the loss
experience of all similarly situated producers is the same, i.e., there are no anomalies to detect.
Similarly, endorsements or ECICs for which the indemnity is a function of the indemnity of an
underlying ECIC (e.g., Cottonseed Pilot) are also, in general, not subject to Data Mining Review.
1
Individual Policy Reviews: An Individual Policy Review, as described in Appendix IV, section
III(b)(2), is a review of any ECIC or endorsement specifically assigned and denoted as such by
RMA. The trigger for an Individual Policy Review is the specific notification by RMA to an AIP to
1
For both area/index plans and endorsements such as the Cottonseed Pilot, the guidance does not preclude the
use of data mining. There may be specific issues that arise in the future that are amenable to a data mining
approach, and the guidance allows for that possibility.
conduct a review and denoted as such in email, letter, or similar correspondence providing the
instruction. Any ECIC or endorsement is potentially subject to an Individual Policy Review.
Conflict of Interest Reviews: SRA Appendix IV, section III(b)(3)(A), requires AIPs to conduct
Conflict of Interest (COI) reviews. However, in lieu of the COI criteria stated in Appendix IV,
RMA provides each AIP with the specific list of ECICs for which a Conflict of Interest review is
required if a claim is filed. If an ECIC is not on the list provided by RMA, the AIP is not required
to conduct a COI review of the policy even if it would otherwise satisfy the Appendix IV criteria.
A Conflict of Interest Review is required for any ECIC or endorsement that (1) is on the COI list
provided to the AIP by RMA, and (2) a claim for indemnity is filed.
Consecutive Loss Adjuster Reviews: A Consecutive Loss Adjuster Review is required of at least
15 percent of the ECICs where, for any combination of ECIC and/or endorsement, all of which
require individual loss adjustment, the same loss adjuster has signed the respective claims for
indemnity for three consecutive years. To illustrate, consider a producer that has purchased an
individual yield based policy along with the High Risk Alternate Coverage Endorsement. If the
producer has an indemnity under the individual yield based policy and/or the High Risk
Endorsement for three consecutive years, and the same adjuster signs the claim for all three
years, this producer would be subject to the 15 percent Consecutive Loss Adjuster Review
requirement. Conversely, for a producer with an individual yield based policy and the
Supplemental Coverage Option (SCO), any SCO claim would not count toward the three
consecutive years because SCO does not require individual loss adjustment.
$200,000 Indemnity Reviews: A $200,000 Indemnity Review is required for any ECIC, or for any
endorsement that provides for an indemnity distinct from the underlying ECIC, for which the
indemnity exceeds $200,000. Below is a guide to application of the $200,000 Indemnity Review
requirement for the various permutations of ECICs and endorsements.
• When two plans of insurance are combined (e.g., individual yield based policy and
Margin Protection), each policy is treated as an ECIC subject to its own $200,000
Indemnity Review.
• When the indemnity for the endorsement (or ECIC) is directly a function of the indemnity
of the underlying ECIC as with cottonseed, the indemnities for the underlying policy and
endorsement/ECIC are summed to determine if the $200,000 threshold is met.
• An endorsement that modifies the underlying plan of insurance (MUP) without providing
for a separate indemnity payment is not subject to $200,000 Indemnity Review. Rather,
the $200,000 Indemnity Review would apply to the underlying ECIC as modified by the
endorsement.
Rainfall Index and Vegetation Index Reviews: Review requirements for any ECIC or
endorsement based upon either of these insurance plans are as stated in SRA Appendix IV,
section III(b)(3)(D), augmented with the requirement to verify that the reported practice is a
good farming practice, per element (4) in the definition of inspection in Section I of the SRA. The
latter requirement was added because of concerns that some insureds were not reporting the
practice correctly, which resulted in guarantees higher than otherwise warranted.
CATEGORIES OF INSURANCE PLANS AND ENDORSEMENTS
The SRA Appendix IV review requirements implicitly assume a single ECIC (and potential
indemnity payment) for any insured commodity. However, new insurance features allow
producers to purchase multiple insurance products for a given commodity, each covering a
different aspect or layer of risk. The below provides guidance regarding the treatment of
potential combinations of insurance plans and endorsements.
Stand-Alone Insurance Plans
For review purposes, certain plans of insurance are grouped into larger categories. The defining
characteristics for the groupings are described below. Certain insurance plans not readily
grouped with other plans are maintained as separate, distinct categories in the Review Matrix.
Individual Yield Based: This category includes plans of insurance that base the guarantee, at
least in part, upon the production history of the individual producer. This category also requires
a loss adjuster to make an assessment of the cause and amount of loss claimed by the
producer. A review of an ECIC from this category will require an AIP to conduct an inspection as
defined in section I of the body of the SRA, along with an Actual Production History Verification
as defined in SRA Appendix IV, section III(c).
Asset Based: Plans of insurance in this category base the guarantee on the physical stock/value
of the productive asset rather than production, such as for tree and nursery crops. For review
purposes, this category also includes the Dollar plans of insurance for which the guarantee is
derived from a fixed monetary value established by RMA. This category of insurance plans
requires a loss adjuster to make an assessment of the causes and amount of loss claimed by the
individual producer.
Area Based: These plans of insurance provide coverage based, at least in part, upon the
production history of some broader geographic aggregate (e.g., a county) as reported by a
governmental agency (e.g., USDA National Agricultural Statistics Service) or similar authority.
Loss determinations are also based upon data reported by the governmental agency, such that
a loss adjuster is not needed to validate the cause and amount of loss for an individual
producer.
Rainfall Index & Vegetation Index: Any ECIC based on the Rainfall Index or Vegetation Index
insurance models, including policies for Annual Forage and for Apiculture. Loss determinations
are based upon precipitation measurements or digital imagery from a third party source, such
that a loss adjuster is not needed to validate the cause and amount of loss for an individual
producer.
Actual Revenue History, Whole Farm Revenue Protection, Margin Protection, and Stacked
Income Protection: These insurance plans are maintained as separate, distinct categories in the
Review Matrix with specified review and inspection requirements for each. Both Margin
Protection (MP) and Stacked Income Protection (STAX) reflect Area Based insurance principles.
However, MP and STAX are offered as both stand-alone insurance plans as well as
endorsements, unlike other Area Based plans. Thus, MP and STAX are not included in the Area
Based category.
Two Insurance Plans
In certain situations producers have the option to purchase two plans of insurance that provide
complementary coverage, e.g., a cotton producer who purchases a Revenue Protection policy
along with a Stacked Income Protection policy. In these situations, each ECIC is treated as an
independent policy subject to the applicable review and inspection requirements of the
corresponding stand-alone insurance plan. For example, the Revenue Protection ECIC in the
above cotton producer example would be subject to all review and inspection requirements of
the stand-alone individual yield based category. Similarly, the Stacked Income Protection ECIC
would be subject to the review and inspection requirements of a stand-alone STAX ECIC.
Endorsements
For purposes of quality control reviews, three types of endorsements are identified:
• MUP Endorsement – modifies coverage of underlying policy.
• Factored Endorsement (or ECIC) – indemnity provided under the endorsement (or ECIC)
is a function of the indemnity of the underlying policy.
• Independent Endorsement – indemnity provided under the endorsement is triggered
independently of the indemnity of the underlying policy.
MUP Endorsement: This type of endorsement modifies the coverage of the underlying plan of
insurance, but does not itself provide for an indemnity payment. For example, the Dry Bean
Revenue Endorsement adds revenue protection to the Dry Bean yield policy, and this modified
policy is the basis on which coverage amounts, premiums, and indemnity payments are
determined. The Dry Bean Revenue Endorsement, however, does not provide for an indemnity
payment separate from that of the Dry Bean yield policy. The MUP Endorsement is not subject
to any reviews that are independent of and distinct from those of the underlying ECIC. Rather,
the review and inspection requirements apply to the ECIC as modified by the MUP
Endorsement.
Factored Endorsement (or ECIC): This type of endorsement or ECIC provides for an indemnity
that is derived from the indemnity of the underlying ECIC. For example, consider an
endorsement in which the guarantee, production to count, and indemnity are set equal to 0.2
times the corresponding values for the underlying ECIC. Thus, once the amount of
loss/indemnity is known for the underlying ECIC, the corresponding amount of loss/indemnity
for a Factored Endorsement is also known (perhaps following some additional mathematical
manipulation). Because the loss for a Factored Endorsement is wholly dependent on the loss of
the underlying ECIC, the two indemnities are summed for purposes of a $200,000 Indemnity
Review. Except for the Individual Policy Review, other reviews will originate with the underlying
ECIC. The Cottonseed Pilot Endorsement is currently the only Factored Endorsement offered.
Independent Endorsement: The indemnity provided with this type of endorsement is triggered
independently of any indemnity determined for the underlying ECIC. For example, a rice
producer could receive an indemnity under the Downed Rice Endorsement but receive no
indemnity from the individual yield based policy. The review and inspection requirements for
independent endorsements reflect those of the insurance plan category each endorsement
most closely resembles. Thus, for example, the review and inspection requirements for the
Downed Rice Endorsement, CAT for High Risk Land and High Risk Alternate Coverage
endorsements reflect those of the individual yield based plan. Likewise, the review and
inspection requirements for the Supplemental Coverage Option reflect those of the Stacked
Income Protection insurance plan because the two insurance products are conceptually similar.
Insurance Plans & Endorsements
Stand-Alone Insurance Plans
Data
Mining
Individual
Policy
Conflict of
Interest
Consec
Loss
Adjuster
$200K
Indemnity
**
Rainfall &
Veg Index
1 2 3 4 5 6 7 8 9 10 (a)
Individual Yield Based y y y y y y y y y y y y y y
Asset Based y y y y y y y y y y y y y
Area Based y * y y y y y y y y y
Rainfall Index & Vegetation Index y * y y y y
Actual Revenue History y y y y y y y y y y y y y y
Whole Farm Revenue Protection y y y y y y y y y y y y y
Margin Protection y * y y y y y y y y y
Stacked Income Protection y * y y y y y y y y y
Two Insurance Plans
Data
Mining
Individual
Policy
Conflict of
Interest
Consec
Loss
Adjuster
$200K
Indemnity
**
Rainfall &
Veg Index
1 2 3 4 5 6 7 8 9 10 (a)
Individual Yield \ Margin Protection
y \ n y \ y y \ * y \ n y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ n
Individual Yield \ Stacked Income Protection y \ n y \ y y \ * y \ n y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ n
Whole Farm \ Stacked Income Protection y \ n y \ y y \ * y \ n y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Whole Farm \ Individual Yield y \ y y \ y y \ y y \ y y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y n \ y
Whole Farm \ Area Based y \ n y \ y y \ * y \ n y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Whole Farm \ Asset Based y \ y y \ y y \ y y \ y y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Whole Farm \ Actual Revenue History y \ y y \ y y \ y y \ y y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y n \ y
Whole Farm \ Margin Protection y \ n y \ y y \ * y \ n y \ y
y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Underlying Plan + Separate Endorsement
Data
Mining
Individual
Policy
Conflict of
Interest
Consec
Loss
Adjuster
$200K
Indemnity
**
Rainfall &
Veg Index
1 2 3 4 5 6 7 8 9 10 (a)
Individual Yield + MUP
m m m m m m m m m m m m m m
Asset Based + MUP
m m m m m m m m m m m m m
Actual Revenue + MUP
m m m m m m m m m m m m m m
Individual Yield \ Supplemental Coverage Option
y \ n y \ y y \ * y \ n y \ y y \ y y \ n y \ y y \ y y \ y y \ y y \ y y \ y y \ n
Individual Yield \ High Risk Alternate Coverage y \ y y \ y y \ * b y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Individual Yield \ CAT for High Risk Land y \ y y \ y y \ * b y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Individual Yield \ Downed Rice Endorsement y \ y y \ y y \ * b y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ n
Underlying Plan + Factored Endorsement
Data
Mining
Individual
Policy
Conflict of
Interest
Consec
Loss
Adjuster
$200K
Indemnity
**
Rainfall &
Veg Index
1 2 3 4 5 6 7 8 9 10 (a)
Individual Yield \ Cottonseed Pilot y \ n y \ y y \ n y \ n c y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Stacked Income Protection \ Cottonseed Pilot y \ y * \ n c y \ y y \ y y \ y y \ y y \ y y \ y y \ y y \ y
Individual Policy Review: A review of an ECIC specifically assigned by RMA to an AIP and denoted as such in the correspondence (email, letter) directing the AIP to conduct the review.
10 (a) Three percent random sample requirement applies to PRF, Apiculture, and Annual Forage.
** Only for cells denoted with a "c" are the first and second plan indemnities summed for $200K Indemnity Review purposes. For all other entries, the indemnity triggers are independent.
Insurance Plan Category Insurance Plan Category
Individual Yield Based
Actual Revenue History Endorsement
Asset Based Whole Farm Revenue Protection
Area Based Margin Protection
Rainfall Index & Vegetation Index Stacked Income Protection
Insurance plans included in category
01, 02, 03, 41, 90
40, 43, 50, 51, 55
04, 05, 06
13, 14
Inspection Element
SRA APPENDIX IV REVIEW REQUIREMENTS
Applicable Reviews
Insurance plans included in category
47
76
16, 17
35, 36
Codes used in review matrix
y : Yes, review requirement is applicable to plan/endorsement
m : Yes, review requirement applicable to underlying plan as modified by endorsement
n : No, review requirement is not applicable to plan/endorsement
Blank cell : Does not apply
* : Currently not subject to a Conflict of Interest review as data mining does not identify anomalies among the individual ECICs for the indicated plans of insurance.
y \ y : Yes, applicable to first plan independent of second plan \ Yes, applicable to second plan (or endorsement) independent of first plan
y \ n : Yes, applicable to first plan independent of second plan \ No, not applicable to second plan (or endorsement)
c : Cumulative indemnity ($200K Indemnity Review triggered if cumulative indemity > $200K)
** Only for cells denoted with a "c" are first and second plan indemnities summed for $200K review purposes. For all other entries, the indemnity triggers are independent.
b : Triggered if same loss adjuster signs claim for indemnity for the underlying plan and/or endorsement in 3 consecutive years.
Illustrations:
Individual Based: Subject to all review requirements, and inspection elements 1-9.
Area Based: Subject only to Conflict of Interest and $200K Indemnity reviews, and inspection elements 1-8.
Individual Yield \ Margin Protection: Ind Yield subject to all review requirements and inspection elements 1-9; Margin Protection subject to Individual Policy
and $200K Indemnity reviews with inspection elements 1-8. Do not combine indemnities for purposes of $200K Indemnity review.
c: $200K Indemnity review triggered if Indiv Yield indemnity + Cottonseed indemnity > $200K, no $200K Indemnity review if sum of indemnity payments ≤ $200K.
b: Consec Loss Adjuster review triggered if same loss adjuster signs claim form 3 consecutive years for any combination of indemnity payments on plan and endorsement. For example,
if adjuster A only signed the claim form for Individual Yield in year 1, the Downed Rice claim form in year 2, and the Individual Yield claim form in year 3, that would qualify for
a Consec Loss Adjuster review.
Inspection elements as defined in the SRA
SRA Section I. Definitions
“Inspection” means verification:
1 As to whether the application, production report, acreage report, notice of claim, or other relevant documents in accordance with FCIC procedures
(such as a Farm Report for AGR eligible crop insurance contracts) were timely submitted; [Note: Whole Farm has replaced AGR]
2 Of the information reported on the documents:
A Referenced in (1) above, and related to the claim, including preliminary and final loss adjustment (Verification of the approved yields will consist
of examination of the records supporting the last three years certified for the crop); and
B Related to pre-harvest, growing season, or pre-acceptance examination of the crop;
3 That policy documents, including, but not limited to, actuarial documents, have been properly used and applied;
4 That the reported practice is being carried out in accordance with good farming practices;
5 That the crop has been planted, or replanted as applicable;
6 That the policy constitutes an eligible crop insurance contract;
7 That the producer qualifies as an eligible producer; and
8 That the agent or loss adjuster has complied with FCIC procedures."
SRA Appendix IV, Section III('c)
9 APH record reviews are required for all eligible crop insurance contracts reviewed under Appendix IV for which APH forms the basis for all or part of the guarantee.
SRA Appendix IV, Section III(b)(3)(D)
10 Review requirements for Rainfall Index and Vegetation Index plans of insurance. Three percent random sample requirement applies to PRF, Apiculture, and Annual Forage.
MUP: Endorsement that Modifies Underlying Plan of Insurance
Dry Bean Revenue Endorsement Adds revenue coverage to underlying policy
Dry Pea Revenue Endorsement Adds revenue coverage to underlying policy
Florida Fruit Tree Comp Tree Value Endorsement Adds CTV to underlying policy
Hawaiian Tropical Tree Pilot Crop Endorsement Adds CTV to underlying policy
Hybrid Seed Price Endorsement Adds alternative pricing mechanism for underlying policy
Malting Barley Endorsement Adds alternative pricing mechanism for underlying policy
Northern Potato Certified Seed Endorsement Provides coverage for certified seed potato production
Northern Potato Processing Quality Endorsement Modifies production to count for underlying policy for quality adjustments for processing purposes
Northern Potato Quality Endorsement Modifies production to count for underlying policy for quality adjustments
Northern Potato Storage Endorsement Extends period for discovering insured losses for underlying policy
Nursery Price Endorsement Adds alternative pricing mechanism for underlying policy
Nursery Rehabilitation Endorsement Adds coverage for rehabilitation costs incurred to recover from injuries due to an insured cause of loss
Nursery Peak Inventory Endorsement Adds coverage to increase liability during peak inventory period
Onion Pilot Stage Removal Option Eliminates stage-based guarantees for underlying policy
Quarantine Endorsement Adds quarantine as an insured cause of loss to underlying policy
Silage Sorghum Pilot Endorsement Adds new crop to underlying policy
Sprinkler Irrigated Rice Endorsement Adds new insurable practice to underlying policy
Sugar Beet Stage Removal Option Eliminates stage-based guarantees for underlying policy
Sweet Potato Storage Endorsement Extends period for discovering insured losses for underlying policy
Texas Citrus Tree Comp Tree Value Endorsement Adds CTV to underlying policy
Texas Citrus Tree Coverage Enhancement Option Adds CEO for underlying policy
Winter Coverage Endorsement Adds options to underlying policy for winter kill of fall-planted wheat and barley
