TO:       All Reinsured Companies
          All Risk Management Agency Field Offices
          All Other Interested Parties

FROM:     Kenneth D. Ackerman /s/ Ken Ackerman    2-22-99

SUBJECT:  Payment of Rebates, Dividends, and Patronage Refunds

The Risk Management Agency (RMA) has received numerous complaints regarding
certain marketing practices involving potential rebates.  RMA is in the 
process of publishing a regulation to govern these practices.   Currently, 
the Standard Reinsurance Agreement specifically prohibits rebates and rebating 
of any kind.

Payment of rebates, dividends, and patronage refunds, if improperly made, may
have an adverse effect on RMA's ability to devise and establish an effective 
and efficient crop insurance marketplace.  An effective and efficient marketplace 
is necessary to best meet the risk management needs of producers.  RMA must also 
be provided the opportunity to fulfill its responsibility to protect the integrity 
of the crop insurance program and its participants.

Dividends and patronage refunds are normal business practices for mutual, 
cooperative, and certain other insurance companies as well as to certain kinds 
of cooperatives such as insurance-buying groups and certain agricultural lenders. 
However, if dividends and patronage refunds are guaranteed to potential 
policyholders in advance, or are made contingent upon the continued purchase of 
crop insurance policies, or the payments are made only to insureds, such 
inducements are prohibited rebates. 

RMA strongly advises that any marketing activity, as described in this 
memorandum, which may have the potential to disguise rebating schemes cease 
and desist immediately until RMA has published its regulations governing 
such practices.

If you should have any questions, please contact your Reinsurance Services 
Division account executive.