ASI Firing Back at Private Insurance Nay Sayers

WASHINGTON-Recent negativity about private share insurance has American Share Insurance President and CEO Dennis Adams all fired up. Most recently, NAFCU announced in a Credit Union Times exclusive (CU Times, Feb. 26) a policy statement that it believed all credit unions chartered in the United States should carry federal insurance as their primary insurer. “I’m surprised to see them take this position on the issue. So far, we’ve had a peaceful coexistence with NAFCU,” Adams commented. He said this type of statement serves to undermine the credit union system, credit union choice, and credit union members. Statements by NAFCU, Navy Federal Credit Union, and NCUA have stated that they are concerned about the strength of the private insurer to sustain large losses, particularly after the inclusion of $2.9 billion Patelco Credit Union among its members, which accounts for nearly a quarter of the fund’s assets. However, Adams pointed out that private insurance has been in existence a lot longer than the National Credit Union Share Insurance Fund and claimed that the NCUSIF’s 1% capitalization structure was modeled after ASI’s. ASI’s growth is a testament to its strength; ASI’s business grew nearly 40% in 2002, said Adams. The corporation posted positive earnings for its 28th straight year, according to ASI. Audited financial statements will be distributed to all member credit unions in early March. ASI’s CEO added, “I’m always amazed by people who seem to know the least say the most.” Adams pointed out that, to his knowledge, Navy Federal President and CEO Brian McDonnell and NAFCU President and CEO Fred Becker have never contacted ASI. Adams said he really feels that the recent discussion among these credit union officials and the “defamatory statements” from federal regulators have been an assault on ASI. While he admits ASI is the only private insurer left, other than the Rhode Island incident, all other insurers “closed without impairment to their members.” As far as the highly unlikely-ASI reported record levels of assets, equity and insurance at year-end 2002 as press time approached-but possible failure of ASI affecting consumer perception of federal insurance, Adams said he knows of at least one instance, after the Rhode Island Share Deposit and Indemnity Corporation situation broke, where a federally insured Massachusetts credit union experienced a large influx of funds. He said this scenario demonstrates member awareness of the difference between private and federal insurance. Educating members of the differences between federal and private deposit insurance has been a mission of ASI’s, Adams said. He explained that the insurer has helped educate its member credit unions on the disclosures required in Section 151 of the Federal Deposit Insurance Corporation Improvement Act. He said ASI has always been supportive of disclosure, since in Ohio, where ASI is based, similar disclosures have been required since 1988. “ASI has never lobbied in any manner to restrain FTC (Federal Trade Commission) from enforcing and funding the regulation,” Adams said, adding he did not appreciate other organizations stepping in and trying to fulfill the FTC’s role. However, ASI does not require these disclosures for membership or survey members to see if it is being done. While FTC is charged with enforcing disclosure of private deposit insurance, Congress has never funded its own law and FTC has been reluctant to stray so far from its typical jurisdiction. Adams said that at the time the FTC seemed the best choice for enforcement and he knows of nothing that would have changed that. With the recent flare up of the issue, Adams said ASI would work to reeducate its membership on the Section 151 disclosures. Adams also said there is a perception that ASI’s scrutiny during examinations is not as high as the federal level. He said that NCUA conducts on-site examinations at 15% of federally insured credit unions annually, while ASI is on-site at 65% of its credit unions each year. In addition, 60% of those ASI examinations are conducted in conjunction with the state regulator. ASI also has monthly to quarterly monitoring of financial statements as opposed to NCUA’s recent switch from semi-annual to quarterly call reports. Patelco has been a special case for ASI, receiving two on-site examinations each year and submitting monthly financial statements, as well as board minutes, policy changes, and other critical data monthly. The additional scrutiny “helps us get our arms around the risk concentration,” Adams remarked. He added that the Patelco conversion last year has not led to any tidal wave of conversions to private insurance. There were a total of three conversions in 2002 and currently four pending, all the result of Maryland’s credit union law modernization. Two of these credit unions have already had on-site exams and, while Adams did not promise anything, he said ASI saw no concerns with the institutions. ASI’s chief said another reason the private insurer would not become another RISDIC is because the company only insures credit unions. “Two banks took that institution out,” he said. Another issue that opponents have raised is that only a simple majority of 20% of a credit union’s membership needs to vote in favor of a conversion for its approval. However, as Adam’s pointed out, voter turnout for presidential and off-year elections is not much better. He said conversions have 27% of the membership voting on average. [email protected]