Kansas Bankers Surety Co., an insurance firm in Topeka, said it will no longer offer banks a tool designed to protect deposits of more than $100,000.
The Berkshire Hathaway subsidiary is sending letters to its bank customers this week notifying them that it will stop offering bank deposit guaranty bonds, said Chuck Towle, senior vice president at Kansas Bankers Surety.
He did not specify when the program will be phased out, saying only that it would happen "eventually."
He said his company could not find reinsurance for the product. He would not speculate why reinsurers are no longer interested.
Kansas Bankers Surety "hasn't canceled bonds for anybody," but it will no longer issue them, Mr. Towle said. It has the right to cancel the policies with a 90-day written notice, he said.
The bonds, an insurance policy for deposits that exceed the Federal Deposit Insurance Corp.'s coverage cap of $100,000, are limited to $20 million per institution. Kansas Bankers Surety has offered them since 1993 and will continue to provide other insurance products to financial institutions, Mr. Towle said.
Chuck Stones, the president of the Kansas Bankers Association, said he plans to send members an e-mail letting them know the organization was "actively searching for alternatives."
"This has been a valuable product to Kansas bankers in attracting larger depositors," Mr. Stones said. "The last thing we want is for our members to panic."
Mr. Towle would not say how many banks participated in the bond program, but Mr. Stones estimated that 200 banks in Kansas would be affected.
Promontory Interfinancial Network LLC in Washington has extended a discount on its Certificate of Deposit Account Registry Service to customers of Kansas Bankers Surety. Individual depositors can get FDIC coverage of up to $50 million through the CDARS service.
In a written statement to American Banker Tuesday, Promontory said that for the next 90 days it would let banks that have policies with Kansas Bankers Surety join the CDARS Network at a 40% discount, through a participating trade association.
Promontory also said that it would waive bank transaction fees for any deposits covered by a Kansas Bankers Surety policy for a CDARS CD of up to a year in maturity.
