SIC 6399

Establishments providing insurance coverage but not covered by any other insurance category make up the industry classification entitled Insurance Carriers, Not Elsewhere Classified (NEC). Federally-supported organizations providing insurance for financial institution deposits make up most of this industry. Other miscellaneous insurers, however, cover everything from pets and trademarks to body parts and automobile warranties.

NAICS Code(s)

524128 (Other Direct Insurance Carriers (except Life, Health, and Medical))

The Federal Deposit Insurance Corporation (FDIC) is the largest organization in this industry. Created by the Banking Act of 1933 following the failure of more than 8,000 banks during the depression, the FDIC promotes and preserves public confidence in U.S. financial institutions by insuring bank and thrift deposits up to the legal limit of $100,000 per account. In 1999, the FDIC insured more than $3 trillion of U.S. bank and thrift deposits at approximately 11,000 institutions. But the FDIC has other responsibilities besides acting as an insurer. It examines state-chartered banks that are not members of the Federal Reserve System for safety, soundness, and compliance with consumer protection laws. The FDIC may liquidate the assets of failed institutions to reimburse the insurance funds for the cost of failures. It also has the power to set interest rate limits and approve bank mergers.

An independent government agency within the executive branch, the FDIC is run like a private company by a five-member board of directors that includes the Comptroller of Currency, the Director of the Office of Thrift Supervision, and three presidential appointees. The Corporation does not operate on funds appropriated by Congress. Its income is derived from assessments on deposits held by insured banks and from interest on the required investment of its surplus funds in government securities. It also has authority to borrow from the Treasury up to $30 billion for insurance purposes.

Congress passed the FDIC Improvement Act (FDICIA) in 1991. The law instituted a number of agency reforms and gave the FDIC increased power over foreign banks active in the United States. The agency has also been affected by a number of federal laws relating to the downsizing of the federal government. The FDIC cut $143 million or 8 percent from budget between 1996 and 1997. Employee compensation was reduced the most during that period, 8.9 percent to $867 million. The agency's payroll shrunk from more than 17,000 workers in 1995 to just 7,241 in 1998. In 1997, the FDIC approved a budget of $1.62 billion, down $221 million or 12 percent from the $1.84 billion authorized in 1996. In each of the next two years the agency operated on a $1.2 billion budget.

The Savings Association Insurance Fund (SAIF) is the second major federal depository insurance organization. Administered by the FDIC, SAIF insures deposits at the nation's savings and loan institutions up to $100,000 per account. Concerned with sagging funds at SAIF in the mid 1990s, Congress passed the Deposit Insurance Funds Act of 1996, which directed the FDIC to take immediate steps to recapitalize SAIF and change the basis on which funds were raised. In response, the FDIC levied a $4.5 billion special assessment (equal to nearly a year's earnings on SAIF-insured deposits) to fully fund SAIF. As a result of recapitalization, deposit insurance premiums for SAIF-insured thrifts were approximately $800 million lower in 1997 than in 1996. Meanwhile, SAIF's earnings were on the rise, increasing from $550 million in 1997 to $584 million in 1998. Almost all revenue for both years was derived from interest on investments in U.S. Treasury securities and deposit insurance assessments. By 1999, SAIF had an unrestricted fund balance of $9.2 billion and $978 million in the restricted Special Reserve.

In 1999, Dun and Bradstreet listed more than 900 insurance carriers doing business within this industrial classification. Other industry leaders included Veterinary Pet Insurance Co., a subsidiary of California Veterinary Services, Inc., which underwrites health insurance for pets. It generated $5.5 million in revenue during 1997, and employed 55 workers. Warrantech Consumer Product Services Inc., a Connecticut-based insurer of warranties, employed 100 workers in 1997 and reported revenue of $23 million. General Star Management, a commercial specialty risk insurer based in Stamford, Connecticut, employed 281 workers in 1997 and generated $14.4 million in revenue. Travel Guard International, Inc., an underwriter of travel insurance based in Stevens Point, Wisconsin, employed 99 workers in 1997 and reported earnings of $7.8 million.

Further Reading

Hoeschen, Brad. "SAIF bet: Last year's insurance fund charge pays off in higher rates, earnings." Business Journal — Milwaukee, 14 November 1997.

"The New York Times Almanac 2000: The Almanac of Record." New York: Penguin Reference Books 1999.

U.S. Bureau of the Census Web site. . December 1999.

U.S. Department of Commerce Web site. . December 1999.

U.S. Department of Labor Web site. . December 1999.

"The United States Government Manual." The Office of the Federal Register, National Archives and Records Administration. 1998-1999 edition.

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