NAFCU Opposes Private Insurance Bid

ARLINGTON, Va. – NAFCU, whose members are required to obtain federal deposit insurance provided by NCUA, called on state regulators in Washington state to reject a bid to revive private insurance for state chartered credit unions. Raising the specter of the failure of the private insurer in Rhode Island–known as RISDIC–NAFCU told the Washington Department of Financial Institutions “primary share insurance coverage provided by private entities is fundamentally flawed and cannot adequately protect American depositors.” The DFI is considering a rule that would allow American Share Insurance, the sole survivor of a network of two dozen state deposit insurers, to provide coverage in the Evergreen State, a decade after the state’s own insurer, Washington CU Share Guarantee Association, dissolved in the wake of the RISDIC crisis. Federal deposit insurance funds, such as NCUA’s National CU Share Insurance Fund, are the only ones with the ultimate backing of the U.S. government, said NAFCU President Fred Becker, in a comment letter to the DFI. In contrast, American Share Insurance does not have federal backing and has no reinsurance, asserted Becker. “For this very reason, the General Accountability Office in 203 doubted the ability of a private insurer’s ability to ‘absorb catastrophic losses.’” NAFCU has a recent history of opposition to private deposit insurance, opposing a provision in the regulatory relief bill, eventually removed, that would allow more than 300 privately insured credit unions to join the Federal Home Loan Bank System.