On July 28, 2020, the Risk Management Agency (RMA) issued Product Management Bulletin: PM-20-051, involving the Hurricane Insurance Protection – Wind Index End of Insurance Extension Option, the Hurricane Insurance Protection – Wind Index Endorsement 2020 End of Insurance Extension Option, and the Hurricane Insurance Protection – Wind Index End of Insurance Extension Option Procedures. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/PM-20-051; https://www.rma.usda.gov/-/media/RMAweb/Policies/Hurricane-Insurance-Wind-Index/2020/Hurricane-Insurance-Protection-Wind-Index-Endorsement-20-HIP-WI/Hurricane-Insurance-Protection-Wind-Index-Endorsement-20-HIP-WI-Extension.ashx; https://www.rma.usda.gov/-/media/RMAweb/Policies/Hurricane-Insurance-Wind-Index/2020/Hurricane-Insurance-Protection-Wind-Index-Endorsement-20-HIP-WI/HIP-WI-Extension-Option-Procedures.ashx.
RMA states the Federal Crop Insurance Corporation Board of Directors approved the Hurricane Insurance Protection – Wind Index Endorsement, on November 15, 2019, and approved the End of Insurance Extension Option on June 23, 2020. RMA states the option is available for the 2020 crop year for apples, blueberries, grapes, and peaches.
RMA states that the time period covered by the Hurricane Insurance Protection – Wind Index endorsement is based on the insurance period of the underlying crop policy. The Hurricane Insurance Protection – Wind Index coverage begins at the sales closing date of the underlying crop policy and ends at the end of insurance date of the underlying crop policy. RMA states this approach is intended to ensure that the coverage provided by the Hurricane Insurance Protection – Wind Index Endorsement is consistent with the coverage provided by the underlying crop policy.
However, RMA states that there are four crops where the insurance period for the underlying crop policies does not align with the risk period for the crop, which leads to gaps in Hurricane Insurance Protection – Wind Index coverage for apples, blueberries, grapes, and peaches. RMA states that to address this gap of coverage, it has created a one-time time option where producers may elect to extend the end of insurance date for their existing Hurricane Insurance Protection – Wind Index Endorsement to November 20, 2020. RMA states that additional premium will be due since the risk period is extended and that the sales closing date for the Option is August 31, 2020.
ANALYSIS – PM-20-051 is a little ambiguous. RMA states that the insurance period for the Hurricane Insurance Protection – Wind Index Endorsement corresponds with the insurance period for the crop in the underlying crop policy. However, RMA states that it has identified four crops where the insurance period for the underlying crop policies does not align with the risk period for the crop so it is giving producers the option of extending the Hurricane Insurance Protection – Wind Index Endorsement end of insurance period until November 20, 2020. It is not clear whether the end of insurance period for the underlying crop policy does not cover the entire risk period for hurricanes or it does not cover the period for all risks, which is stated in PM-20-051. If it is the latter, then there remains an issue with the underlying crop policy that is not addressed in PM-20-051.
Further, this is a one time option to extend the insurance period for the Hurricane Insurance Protection – Wind Index Endorsement. Presumably, RMA will be revising the Hurricane Insurance Protection – Wind Index Endorsement for future years to contain the appropriate end of insurance period but it is not discussed in PM-20-051.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.