Colorado CU Commissioner explores allowing SCCUs to be privately insured
DENVER - The Colorado Division of Financial Services has begun the process of determining whether the state's 77 state-chartered CUs should be allowed the option of being privately insured for primary insurance through American Share Insurance (ASI). Commissioner David Paul plans to brief the division's board at its regular meeting...
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DENVER – The Colorado Division of Financial Services has begun the process of determining whether the state’s 77 state-chartered CUs should be allowed the option of being privately insured for primary insurance through American Share Insurance (ASI). Commissioner David Paul plans to brief the division’s board at its regular meeting Oct. 10 on the status of his review of the issue. Paul said he had received “limited expressions of interest” from a small number of credit unions in the state who wanted to know if this was permissible in Colorado. He noted that, “In the 14 years that the Division of Financial Services has been regulating credit unions in Colorado, this is the first time we are formally looking in to this option.” Paul said the Colorado credit union statute allows state-chartered credit unions “to be insured by NCUSIF or by comparable insurance as approved by the Commissioner.” Since there is a statute provision already in place, allowing SCCUs to be privately insured for primary insurance would only require an administrative decision by Paul. Paul emphasized he was not instructed by ASI to consider giving state-chartered credit unions the option to be privately insured and his review was not prompted by any discussions he had with the insurer. “My action is totally in response to inquiries I’ve received from credit unions,” he said. The first step in reaching a decision will be for Paul to make the legal determination if private primary insurance from ASI is comparable with NCUSIF. “It’s either going to be thumbs up or down legally. If it’s no, then there won’t be any need to go further. If it’s yes, then there will be a series of check boxes I’ll go through,” said Paul. Assuming Paul arrives at a thumbs up – ASI is comparable with NCUSIF – he said the next thing he would look at would be ASI’s structure and operations, including their financial condition and how their insurance works. He would also talk with regulators in other states where ASI does business, such as California. Beyond that, Paul would also study how the NCUSIF operates and how its full-faith guarantee of the U.S. government operates. He would also likely look at with other state laws that allow for private insurance and assess how they compare with Colorado’s. Paul will also have to determine if any changes would need to be made to the state’s credit union regulations if he decides to allow private insurance for SCCUs. “If a credit union was no longer insured by NCUSIF, we’d have to look at ways we’d have to promulgate regulations at the state level similar to what NCUA has at the federal level because of NCUSIF.” Colorado state-chartered CUs are already allowed to provide excess share insurance through ASI – Paul said his office has taken position that excess insurance is an incidental power for state-chartered CUs. Although Paul said he wasn’t aware of any SCCU that provided excess insurance through ASI, he said “the Colorado statute is silent on excess or supplemental insurance, so the Division made a ruling that excess insurance is an incidental power for state-chartered credit unions.” Paul said he won’t speculate on how long it will take him to make his decision. “I’m not going to guarantee it will be by Christmas and say a state-chartered credit union will be privately insured by New Year’s Eve. In the course of my study, I could identify some problem area that could take time to resolve. I want to make sure I have all my ducks in a row before I make a determination.” He said Colorado SCCUs “likely” wouldn’t have to wait as long as Maryland SCCUs have had to wait for that state’s revised private insurance code to go in to effect. In 1999, a taskforce was formed to study Maryland’s credit union law. It completed its work in 2001, and a CU bill was sponsored that same year. The operations portion of the law went in to effect October 2001. The private insurance portion was passed separately in April 2002 and went into effect in July. The previous CU act allowed for private insurance but only through one provider, and since 1975 that provider has been Credit Union Insurance Corp. (CUIC). In mid-August, ASI applied with the state regulator’s office to do business in Maryland. Commissioner Mary Louise Preis has 120 days to approve or deny the request. So ASI should know by the end of 2002 whether it will be allowed to do business in Maryland. Mike Marschall, director of legislative, regulatory and governmental affairs for the Maryland Credit Union League said the state’s 11 SCCUs will probably all convert to ASI, and CUIC will discontinue operating in Maryland. The presidents/CEOs of two of the largest SCCUs in Colorado – Doug Ferraro, of $1.2 billion Bellco CU and David Maus, of $452 million Public Service CU – are both on the board of the Division of Financial Services and consequently couldn’t comment for or against allowing private primary share insurance for state-chartered CUs. Ferraro told Credit Union Times that he was aware of the interest among SCCUs and he “knows Commissioner Paul wants to look at private insurance thoroughly to make sure it offers members the necessary protection.” For most SCCUs Credit Union Times talked with though, an administrative decision in favor of allowing ASI to do business in Colorado is not so much an issue of committing to convert to private insurance, as having the choice to. Denver Postal CU President/CEO Sundie Seefried, for example, stopped short of saying she would commit to converting to private insurance if it’s allowed in the state, but she said she supported the idea of state-chartered credit unions having the option to be privately insured if they want to be. She plans to write Paul explaining her position. “Whether or not Denver Postal would convert to primary private insurance would depend on what’s in the best interests of our members, but as a responsibility of my management position, I would probably look into it and do a comparative analysis between ASI and NCUSIF to see what was best for our members.” Mike Litzau, president/CEO of $66 million Colorado Central CU and a member of NASCUS’ alternative share insurance taskforce, agrees with Seefried. He added that, “Having a choice of whether to be federally or privately insured is the basis of dual-chartering. It’s the only thing that makes the choice of regulator valid.” Litzau too said CCCU is not at the present time “committed” to converting to private insurance, “but if Commissioner Paul determines ASI can offer us private primary insurance, then our board will do due diligence and determine if private insurance is better for our members than federal insurance through the NCUSIF.” Litzau said the overhead transfer rate is not a “big factor” in CCCU’s consideration of private insurance. He explained that, “Right now, we have to comply with state regulations and federal regulations pertaining to federally-insured credit unions. If we were privately insured, we wouldn’t be subject to NCUA regulations.” -
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