About GAO: ASI Reserves Are Adequate to Cover Future Losses, But High Geographic and Deposit Concentration Poses Risk "Credit News 24" - ASI,Private Deposit Insurance,Privately Insured Credit Unions, Credit News 24, we has prepared this article well for you to read and retrieve information in it. Okay, happy reading.

GAO: ASI Reserves Are Adequate to Cover Future Losses, But High Geographic and Deposit Concentration Poses Risk "Credit News 24"

In a recent report, the Government Accountability Office (GAO) found that American Share Insurance (ASI) has adequate reserves and has strong ability to cover present and future losses for the credit unions it insures.

ASI insures 125 privately insured credit unions with $13 billion in insured deposits.

According to its most recent examination by the Ohio Department of Insurance, ASI’s reserves for losses were consistent with Ohio’s legal requirements and were adequate and appropriate. Ohio Department of Insurance staff told GAO that ASI is classified as a nonpriority insurer, which means ASI is considered low-risk and does not require enhanced oversight.

While none of the eight state supervisors interviewed by GAO raised concerns about ASI’s financial condition, one state credit union supervisor worried that during volatile economic times ASI might not be able to cover losses once it had exhausted its capital. The supervisor noted that ASI is not backed by the full faith and credit of the U.S. government and has no access to state guaranty funds. However, in the event ASI becomes impaired, it can charge a special assessment to privately insured credit unions.

ASI told GAO that it has several processes in place to mitigate risk and help prevent and control losses from credit unions it insures. ASI conducts an examination of about 70 percent of its credit unions annually and and the rest on a 2–3 year cycle.

At the end of 2015, ASI had $218 million in assets (cash and investments) available to pay claims. But the GAO report noted at at the end of 2015, 14 privately insured credit unions each had more than that amount in total insured deposits.

GAO found that privately insured credit unions have a similar risk profile with federally insured credit unions. However, GAO found that privately insured credit unions are less geographically diverse and have higher levels of deposit concentration than federally insured credit unions.

• Seventy-two percent of ASI-insured credit unions are located in 3 states -- Ohio, Illinois, and Indiana.
• In 2015, ASI’s 2 largest credit unions (by total assets) represented 15 percent of its total insured deposits, and its 10 largest represented 54 percent of its insured deposits. In comparison, NCUA’s 10 largest insured credit unions (by total assets) made up 15 percent of total insured deposits in 2015.

GAO concludes that given this deposit concentration if one or more large privately insured credit unions failed, ASI could face difficulty paying claims.

Read pages 9 thru 21 of GAO report.
Title : GAO: ASI Reserves Are Adequate to Cover Future Losses, But High Geographic and Deposit Concentration Poses Risk "Credit News 24"
link : GAO: ASI Reserves Are Adequate to Cover Future Losses, But High Geographic and Deposit Concentration Poses Risk "Credit News 24"