4000 - Advisory Opinions
Insurance Coverage Afforded Commingled Insurance Premiums Held by an Insurance Broker on Behalf of Insurance Companies and on Its Own Behalf
October 30, 1990
Mark A. Mellon, Senior Attorney
This is in response to your letter of August 28, 1990 to our Office of Consumer Affairs pertaining to federal deposit insurance.
Based on your letter and our telephone conversation, it is my understanding that your firm is an insurance broker which receives insurance premiums on the behalf of insurance companies and that your firm is entitled to a percentage of the premiums as a commission. The premiums are deposited with an FDIC-insured depository institution. You wish to ascertain how these funds would be insured pursuant to our regulations.
The insurance regulations require that the deposit account records of an insured institution must disclose that funds are held pursuant to a fiduciary relationship (such as custodian, agent or trustee) before a claim for deposit insurance based on that relationship will be considered. 12 C.F.R. §330.4(b)(1). If this disclosure requirement is satisfied, the details of the relationship and the interests of the other parties in the funds can then be ascertained either from the deposit account records of the insured institution or from the records of the nominal accountholder (or a person or entity whom the accountholder has hired to keep such records). 12 C.F.R. §330.4(b)(2). Funds owned by a principal or principals and deposited into accounts in the name of an agent will be insured as if deposited in the name of the principal(s). 12 C.F.R. §330.6. The amount of the deposits which are attributable to the owners of the funds will thus be insured to them in whatever right and capacity they are held, for example as corporate funds, and will be aggregated with any other accounts in the insured institution which are held by those owners in the same right and capacity. 12 C.F.R. §330.3(a).
In the instant matter, as long as the deposit account records of the insured institution where the premiums are deposited disclose that your account holds both funds which your firm owns outright and funds which your firm is holding in a fiduciary capacity on the behalf of others, deposit insurance to the statutory limit should be provided to both types of funds. This requirement could be satisfied by having the account titled in such a manner: "XYZ Insurance Broker Account: Funds of Other Entities Held by XYZ as Agent and Funds of XYZ."
If the disclosure requirement is satisfied and if your firm is able to prove from its records which funds are attributable to your firm and which are attributable to insurance companies on whose behalf your firm is acting, the attributable funds will be insured to each owner to $100,000 as corporate funds. 12 C.F.R. §330.9. The funds would be insured to the insurance companies and not to the beneficiaries of the insurance policies since they can not be said to have an interest in the funds, they can only be said to have an interest in the insurance policies.
I hope that this answer is responsive to your query. Please contact me if you have any questions about this or any other matter.