RAAs: FDIC, NCOIL Eye Disclosure

WASHINGTON BUREAU — The Federal Deposit Insurance Corp. (FDIC) and the National Conference of Insurance Legislators (NCOIL) say insurers should make sure insurance beneficiaries understand how retained asset accounts work.

FDIC Chairman Sheila Bair has sent a letter to Therese Vaughan, chief executive officer of the National Association of Insurance Commissioners, Kansas City, Mo., expressing “deep concerns” about whether issuers of retained asset accounts are making it clear to consumers that the accounts are not federally insured.

Kentucky state Rep. Robert Damron, D-Nicholasville, Ky., the president of NCOIL, Troy, N.Y., says he has drafted a “beneficiaries bill of rights” that can ensure strong RAA consumer protections and clear RAA disclosures.

Meanwhile, there are signs that the NAIC may be preparing to arrange for a prompt response to the concerns at its summer meeting in Seattle.

Bair refers in her letter to recent press coverage of the RAA issue.

“Public understanding of FDIC insurance and when and how our guarantee applies is of the highest importance to us,” Bair says in the letter to Vaughan.

The FDIC also is sending a letter to insured depository institutions. Institutions that are involved with RAAs “must be vigilant in minimizing consumer confusion about FDIC insurance coverage,” officials say in the directive.

“Participating banks should work with the insurance companies offering RAAs to make sure that all documents provided to consumers appropriately reflect the participating banks’ role in the transactions and disclose to policyholders and beneficiaries whether or not the RAAs are insured by the FDIC,” officials say.

Damron noted last week that 44 states appear to have no RAA laws or regulations.