4000 - Advisory Opinions
Pass-through Deposit Insurance Coverage for Fiduciary Account
March 27, 1995
Jeffrey M. Kopchik, Counsel
This is in response to your letter to Mr. Claude Rollin concerning federal deposit insurance coverage. It is my understanding from your letter that "X" Insurance ("X"), an insurance broker, maintains an account at an insured depository institution which contains premium payments made by customers. "X" holds these funds on behalf of various insurance carriers for a short period of time until they are remitted to the appropriate carrier. You have inquired whether the designation of your account as a fiduciary account will result in "pass-through" deposit insurance coverage of up to $100,000 per carrier.
Part 330.6 of the FDIC's deposit insurance regulations, 12 CFR § 330.6, provides that "[f]unds owned by a principal or principals and deposited into one or more deposit accounts in the name of an agent, custodian or nominee, other than an insured depository institution, shall be insured to the same extent as if deposited in the name of the principal(s)." Part 330.4(b)(1) of the FDIC's regulations, 12 CFR § 330.4(b)(1), provides that "[t]he deposit account records of an insured depository institution must expressly disclose, by way of specific references, the existence of any fiduciary relationship. . . ." Part 330.4(b)(2) of the Corporation's regulations provides that the interests of the parties in the account must be ascertainable either from the deposit account records of the insured depository institution or from records maintained in good faith and in the normal course of business by the depositor or some other entity that has undertaken to maintain such records for the depositor.
Thus, if the account in question is clearly designated on the bank's records as a fiduciary account (e.g., it is titled "X", as agent for all carriers") and your records (or records maintained for you by some other entity), kept in good faith and in the normal course of business, indicate the amount of funds owned by each carrier, that account will be insured on a "pass-through" basis for a maximum of $100,000 per carrier.