CUNA Comment Letter

RE: Proposed Rule Regarding Surety Bond Coverage

March 5, 1999

Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428

RE: Proposed Rule Regarding Surety Bond Coverage

Dear Ms. Baker:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on NCUA's proposed rule regarding surety bond coverage for losses caused by federal credit union employees and officials and general insurance coverage for losses caused by persons outside of the credit union. CUNA represents more than 90% of our nation's 11,000 state and federal credit unions.

The proposed rule updates and revises NCUA's current rule regarding surety bond coverage. Specifically, the proposed rule clarifies that the minimum required bond coverage, which is based on the asset size of the credit union, is for any single loss. The rule adds a provision that the aggregate limit of liability must be at least twice the single loss limit. This provision on aggregate limits was included because most surety bond policies now provide such a limit. The rule also adds a number of bond forms that may be used without prior NCUA Board approval. Prior written approval would still be required for the use of any other bond form or for the use of any rider or endorsement that limits coverage on the approved bond forms. The remaining provisions are similar to the current rule, although they are now written in a plain English format.

CUNA generally supports the proposed changes. Specifically, we support NCUA's efforts to maintain existing minimum limits while recognizing the need to include aggregate limits, which are now included in most surety bond policies. However, we suggest that there be clarification in the rule that these limits do not apply to optional coverage.

For clarity purposes, we also suggest that the term "fidelity" be used consistently in the rule instead of using that term interchangeably with "surety" or other similar terms. For the bond forms listed in the rule that are already approved for use by NCUA, we suggest that dates be supplied for each form to indicate which version is acceptable.

Thank you for the opportunity to comment on the proposed rule regarding surety bond coverage. If you or your staff have any questions about our comments, please give me a call at 202-718-7795.

Sincerely,

Jeffrey Bloch
Assistant General Counsel for
Regulatory Advocacy