After resisting such a move for months, American Share Insurance Inc., the Ohio-based private carrier, announced last week it is imposing a special premium assessment of 15 basis points on its member credit unions to cover “developing or incurred” losses of a number of its insured credit unions.
In a statement, Dennis Adams, president/CEO, said the firm regrets the charge but “additions to our reserve for losses late in the year” forced the ASI board to assess the premiums “to restore the ASI guarantee fund’s equity above our minimum level of 1.30%.”
No mention was made of which of its 150 insured CUs created the losses, but ASI has previously acknowledged the need for additional revenue following the Oct. 24 failure of the $147 million Cumorah CU of Las Vegas, one of several large Nevada CUs insured by ASI. Cumorah was taken over by the $575 million Credit Union 1 of Rantoul, Ill. in a transaction approved by regulators and ASI.
In recent months, attention has focused heavily on the troubled $883 million Silver State Schools Credit Union, also of Las Vegas and an ASI client, which lost $35.6 million in the first nine months.
In the ASI statement, Adams explained that “record low interest rates and significant guaranty loss-provision expense this year have adversely affected ASI’s current earnings causing our year-end equity ratio to fall below 1.30% for the first time in over 20 years.”
One Nevada CEO, Wayne Tew, who is also president of the $579 million Clark County CU of Las Vegas and ASI-insured, said the assessment “is a double edged sword” in that it protects the integrity of the institution and yet “it represents another financial hit in a lousy year.”
But he called it necessary. “We accept it and go on,” said Tew.
William Ferrence, president/CEO of the $515 million Boulder Dam CU of Boulder City, Nev., said the ASI Board’s decision “was absolutely necessary to keep our fund strong.” He said there was no choice given Cumorah and what is needed for Silver State. But he added, “What we’re going through is pretty minor since the assessment should take care of the problems.” –jrubenstein@cutimes.com