Private Share Insurance in the History of Credit Unions
American Share’s reputation for innovation, financial stability, service and support of the credit union industry spans more than 40 years. Here are some of the notable moments from our history, and the history of credit unions in general.
1970s: The company was founded as the Ohio Credit Union Shareholders Guaranty Association (OCUSGA) in 1974 by a small group of Ohio credit union leaders—including one of the credit union system’s pioneers, Louise McCarren Herring. The company was established as a credit union-owned, private sector alternative to federal share insurance, which was first enabled under federal law in 1971. Nationwide, the idea of an alternative to federal share insurance was taking hold.
1980s: This decade opened with an emphasis on the deregulation of banking services and expanded deposit insurance coverage limits, followed by heavy re-regulation of banking on the heels of double-digit inflation in the early to mid-1980s. In 1981, OCUSGA changed its name to the National Deposit Guaranty Corporation (NDGC) as it broadened its multi-state footprint, and in 1982, NDGC first introduced excess share insurance for credit unions, insuring the credit union member deposits exceeding the then-elevated $100,000 federal insurance limits.
This volatile period was a challenging time for all financial institutions, putting tremendous pressure on S&Ls and the thrift deposit insurance fund, FSLIC. Credit unions also faced stress, leading to the closure of the lesser-capitalized private share insurers and bringing the decade to a close with only 10 funds still operating nationwide. NDGC was one of only two funds operating in more than one state. State-level and federal legislation escalated during 1987-1989. In recognition of a change in our regulatory status to that of being governed under the insurance laws of Ohio, NDGC changed its name again to the National Deposit Insurance Corporation (NDIC).
1990s: Economic stress in the Northeast resulted in continued national attention on all financial service providers and their deposit insurers. In 1991, NDIC again changed its name to reflect an even broader scope as we reached out to other states as they slowly abandoned their single-state funds for credit unions. With the passage of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) in 1991, private share insurance was recognized for the first time in federal banking statutes, encouraging the continuation of the private share insurance option so long as consumer disclosures explained the private coverage sufficiently. American Share passed the tests set by Congress—then and now!
Noting the dismissal of credit union input into NCUA’s operations and budgets, American Share moved quickly to seat a 20+ CEO advisory council to help guide the company’s strategic direction while complying with escalating regulatory burden. The company’s Primary Insured Credit Union Advisory Council convened for the first time in 1992. In 1993, the company created and incorporated Excess Share Insurance (ESI) as a wholly-owned subsidiary of American Share to allow us to serve almost 225 credit unions in 33 states today instead of the 16 states we served prior to ESI. By the mid-1990s, American Mutual Share Insurance Corporation (American Share) was the sole private deposit insurer for the nation.
2000s: As the financial services industry prepared for the Y2K eruption that never materialized, American Share was positioning to be the only alternative to federal share insurance nationwide. The decade was one of significant technological and legal changes, ultimately resulting in improvements to the company’s monitoring and operating programs. In 2000, an internet-based electronic premium payment system (PPS) was introduced to facilitate premium payments by excess-insured credit unions, and American Share implemented the first risk-based pricing model for credit unions. In 2002, the Ohio legislature amended the statute governing American Share’s operations, providing greater flexibility in various operational areas and allowing for more responsive investments.
The decade ended with a more real risk than it started with, in the form of the 2008 international economic recession that brought unprecedented losses to all deposit insurance funds—FDIC, NCUSIF and American Share. American Share, however, weathered these most difficult times more efficiently and cost-effectively than did the federal share insurance fund, which was forced to rewrite the direction and service platform of the entire corporate credit union system between 2009 and 2011. American Share implemented time-tested loss mitigation tools and strategies to save one of its largest member credit unions in Nevada, the epicenter of America’s economic downturn. The mitigation strategies deployed by American Share turned what could have been a big loss exposure into no loss at all.
2010s: As the Great Recession came to a close in year three of the current decade, many credit unions were still feeling the weight of excessive regulatory burden. As a state-chartered credit union’s primary share insurer, American Share fills the necessary role of needed protector of members’ funds, without acting as a secondary regulator. The years have proven that a sound alternative to federal share insurance helps the credit union system prosper and remain creative.
American Share finished 2015 reporting:
- A stronger equity ratio (loss-paying capacity) than its federal counterpart
- The greatest asset base in its 41-year history
- Lower losses per insured shares over the history of the fund than that of the federal share insurance fund
- A strong growth curve, as more credit unions evaluate the benefits of a nonfederal share insurance alternative in today’s burdensome regulatory climate
Today, American Share provides primary share insurance to more than one million credit union members in ten states, and excess share insurance through American Share and its subsidiary ESI to more than 200 credit unions in 33 states and the District of Columbia. We continue to work with our insured credit unions as a business partner—not a regulator—giving us flexibility in program design and enhancing the benefits of our coverage.
As state-chartered credit unions continue to look for ways to enhance their product offerings, grow their businesses and provide greater coverage for their members’ accounts, American Share is here to help.