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CUNA projects premium at 6-10 bp this year
WASHINGTON (7/2/10)—The Credit Union National Association (CUNA) released a white paper Thursday called “Estimating the 2010 NCUSIF Share Insurance Premium,” and it predicts that the National Credit Union Share Insurance Fund (NCUSIF)premium expected to be announced this fall will be in the range of six to 10 basis points of insured shares. That is well within the lower end of the five-25 basis point range projected by the National Credit Union Administration (NCUA) last year, points out CUNA Chief Economist Bill Hampel, the author of the white paper. The fall premium will follow the NCUA’s recently announced assessment of 13.4 basis points of insured shares for Corporate Stabilization, which was in line with expectations. The size of that assessment Hampel notes, suggest neither an increase nor a decrease in the latest estimate of ultimate cost to credit unions of the Corporate Stabilization--a figure whose total will not be known for at least a few more years. Hampel’s fall premium projection assumes that an NCUSIF equity ratio of 1.25% of insured shares would be reasonable at that time, “given the current and expected economic climate, credit unions’ financial condition, and the outlook for additional insurance losses over the coming year.” With the NCUSIF equity ratio at 1.22% as of the most recent reading in May, Hampel says that if current trends continue, by the time the premium is announced the fund’s equity ratio will have declined to 1.19%. “Even with considerable additional insurance losses in the next few months,” Hampel says, “it is highly unlikely that the fund will fall below 1.15% by the time the premium is announced.” That would set the range at Hampel’s predicted six to 10 basis points. Looking ahead to next year, if actual losses from failed credit unions are close to expectations, there will not be a need for much of a premium in 2011, leaving only another Corporate Stabilization assessment of slightly less than 15 basis points. For more, use the resource link below.
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