Canada Production Insurance Regulations (SOR/2005-62)

Coverage Based on Yields

Probable Yields

Marginal note:Probable yield methodologies

• 8 (1) A production insurance agreement shall provide for probable yield methodologies and shall provide that

  • (a) probable yields shall be determined in accordance with those methodologies; and

  • (b) those methodologies shall be subject to the national certification guidelines.

• Marginal note:Statistical measure of yield

  (2) In establishing those methodologies, a statistical measure of yield that is based on actual yields per seeded area shall be used. That measure may be adjusted to reflect the demonstrated productive capability of producers and may take into account the average level of quality produced related to the levels of quality of the agricultural product provided for in an insurance plan.

• Marginal note:Data sources

  (3) If insurance data is unavailable or unrepresentative as a data source for determining the probable yield of an agricultural product, other data sources may be used, as agreed to by the parties to the agreement.

Marginal note:Actuary’s opinion

• 9 (1) A production insurance agreement shall

  • (a) require the submission of an opinion, signed by an actuary, certifying that the probable yield methodologies result in probable yields that accurately reflect the producers’ production capability for the agricultural product;

  • (b) if that opinion is qualified, require the disclosure by the actuary of the extent and sources of any bias in the methodology; and

  • (c) provide for the date for meeting the requirements of paragraph (a).

• Marginal note:Failure to submit opinion

  (2) Until the opinion required by paragraph (1)(a) is submitted, Canada shall limit its payments toward premium and reinsurance payments under the agreement in respect of the relevant fiscal year and subsequent fiscal years to 75% of the amount otherwise payable under the agreement.

• Marginal note:Qualified opinion

  (3) If the opinion of the actuary indicates that there is a bias in the probable yield methodology, payments by Canada shall be limited to the amount that would otherwise be provided for under the agreement.

Marginal note:Definitions

• 10 (1) The following definitions apply in this section.

  provincial actual yield to provincial probable yield ratio

  provincial actual yield to provincial probable yield ratio means the weighted average of all actual or reported yields for a year, adjusted to reflect the level of quality that is provided for in an insurance plan, divided by the provincial probable yield for that year. (rapport entre le rendement réel provincial et le rendement probable provincial)

  provincial moving average yield

  provincial moving average yield means the mean of the annual weighted averages of actual or reported yields, adjusted to reflect the level of quality that is provided for in an insurance plan. (moyenne mobile du rendement provincial)

  provincial probable yield

  provincial probable yield means the weighted average of probable yields, determined in accordance with section 8, of all producers insured under an insurance plan for a year. (rendement probable provincial)

  provincial probable yield to provincial moving average yield ratio

  provincial probable yield to provincial moving average yield ratio means the provincial probable yield for a year, divided by the provincial moving average yield for that year. (rapport entre le rendement probable provincial et la moyenne mobile du rendement provincial)

• Marginal note:Tests for probable yield

  (2) A production insurance agreement shall require the province to submit documents to the Minister to demonstrate, using insurance data of previous years, that the provincial probable yield of an agricultural product in a year meets either of the following tests, which shall be subject to the national certification guidelines:

  • (a) the provincial probable yield to provincial moving average yield ratio for the year does not exceed a value of 1.015; or

  • (b) the mean of the provincial actual yield to provincial probable yield ratio, based on ten years or more, is a value not less than 0.985.

Marginal note:Time for compliance

• 11 (1) A production insurance agreement shall include a schedule, in accordance with the national certification guidelines, that sets out the deadline for the province to submit the documents referred to in subsection 10(2) for each insurance plan that is based on yield.

• Marginal note:Failure to submit documents

  (2) Until the province submits the documents required by subsection 10(2), Canada shall limit its payments toward premium and reinsurance payments under the agreement in respect of the relevant fiscal year and subsequent fiscal years to 75% of the amount otherwise payable under the agreement.

• Marginal note:Documents not demonstrating compliance

  (3) If the documents submitted by the province do not demonstrate, using insurance data of previous years, that the provincial probable yield for an agricultural product in a given year meets the test set out in either paragraph 10(2)(a) or (b), payments by Canada shall be limited to the amount that would otherwise have been payable under the agreement.

Unit Value of an Agricultural Product

Marginal note:Unit value methodologies

• 12 (1) A production insurance agreement shall provide for methodologies for use in determining the value of eligible agricultural products and shall provide that

  • (a) the unit values shall be determined in accordance with those methodologies; and

  • (b) those methodologies shall be subject to the national certification guidelines.

• Marginal note:Additional requirement

  (2) Those unit value methodologies shall be based on one of the following:

  • (a) a market price method that reflects estimated or actual farmgate or replacement values of the production;

  • (b) a cost of production method using standard accounting procedures and recommended provincial agronomic practices; or

  • (c) an alternative method provided for in the agreement.

Marginal note:Maximum unit value

13 A production insurance agreement shall provide that the province shall submit documents to the Minister to demonstrate, using historical market prices or replacement values, that the maximum unit value of an agricultural product meets either of the following tests, which shall be subject to the national certification guidelines:

• (a) the ratio of the average of the maximum unit values to the moving average of the farmgate or replacement values, based on three or more years, does not exceed a value of 1.0; or

• (b) the average of the ratios of the maximum unit value to the actual farmgate or replacement value, based on three or more years, does not exceed a value of 1.0.

Marginal note:Time for compliance

• 14 (1) A production insurance agreement shall provide for the establishment of a schedule, in accordance with the national certification guidelines, that sets out the deadline for the province to submit the documents referred to in section 13 for each insurance plan that is based on yield.

• Marginal note:Failure to submit documents

  (2) Until the province submits the documents required by section 13, Canada shall limit its payments toward premium and reinsurance payments under the agreement in respect of the relevant fiscal year and subsequent fiscal years to 90% of the amount otherwise payable under the agreement.

• Marginal note:Limited payments

  (3) If the province submits the documents required by section 13 but the values determined under paragraphs 13(a) and (b) exceed 1.0, payments by Canada shall be limited to the level of federal premium support provided for high-cost production coverage as set out in the agreement.

• Marginal note:No administrative procedures to prevent moral hazard

  (4) If the values determined under paragraphs 13(a) and (b) exceed 1.0 and the province cannot demonstrate that adequate administrative procedures are in place to prevent moral hazard, payments by Canada shall be based on the lower of the values determined under those paragraphs, which is deemed to be 1.0.

• Marginal note:Administrative procedures to prevent moral hazard

  (5) Subject to subsections (3) and (6), if the values determined under paragraphs 13(a) and (b) exceed 1.0 and the province can demonstrate that adequate administrative procedures are in place to prevent moral hazard, payments by Canada shall be based on the lower of the values determined under those paragraphs, which is deemed to be 1.2 if it exceeds 1.2.

• Marginal note:Methodology without bias

  (6) Despite subsection (3), if the province can demonstrate that the methodology used to determine the unit value contains no bias, only payments by Canada related to the extent that the lower of the values determined under paragraphs 13(a) and (b) exceeds 1.0 shall be limited to the level of federal premium support provided for high-cost production coverage as set out in the agreement.

Coverage Not Based on Yield

Marginal note:Insurable losses

15 If a probable yield is not used as the basis of determining coverage under an insurance plan, the following losses, in whole or in part, may be covered in an insurance plan:

• (a) losses in respect of stands of fruit trees or other perennial plants;

• (b) losses in respect of livestock; and

• (c) losses in respect of agricultural products caused by production being prevented or reduced by weather or another agricultural peril.

Marginal note:Value of production methodologies

• 16 (1) A production insurance agreement shall provide for methodologies for determining the value of production and shall provide that

  • (a) values of production shall be determined in accordance with those methodologies; and

  • (b) those methodologies shall be subject to the national certification guidelines.

• Marginal note:Additional requirement

  (2) Those methodologies are also subject to the following maximum limits:

  • (a) for losses referred to in paragraphs 15(a) and (b),

    • (i) the average cost to re-establish the interrupted production resulting from the loss of the fruit trees, perennial plants or livestock,

    • (ii) 80% of the present value of the expected net income for the period required to re-establish production, where net income is the difference between the value of production of an agricultural product and the average costs of production,

    • (iii) the average costs of production incurred with an insured agricultural product, or

    • (iv) the expected or actual value of an insured agricultural product; and

  • (b) for losses referred to in paragraph 15(c),

    • (i) the average costs of operations in preparation for seeding and planting, namely, summer-fallowing, cultivating, fertilizing the land, purchasing plants for transplanting and other related activities, and the costs incurred with respect to land rental,

    • (ii) 80% of the expected net income for an agricultural product, where net income is the value of production of the agricultural product minus the average costs of production incurred for the agricultural product,

    • (iii) the average costs of production incurred with an insured agricultural product, or

    • (iv) the expected or actual value of an insured agricultural product.

Marginal note:Tests for value of production

17 A production insurance agreement shall provide that the province shall submit documents to the Minister to demonstrate that the value of production of an agricultural product in the province meets either of the following tests, which shall be subject to the national certification guidelines:

• (a) the ratio of the average of the maximum values of production to the moving average of the farmgate or replacement values, based on five or more years of historical data, does not exceed a value of 1.0; or

• (b) the average of the ratios of the maximum value of production to the actual farmgate or replacement value, based on five or more years of historical data, does not exceed a value of 1.0.