Costs of Coverage
The actual cost of the deposit insurance coverage is determined by two factors: (1) the policy limits of coverage provided to the institution; and (2) the risk-rating score assigned to the financial institution using an independent, 3rd party rating system.
In order to activate coverage, a financial institution that has received a favorable underwriting decision from the company must fund a non-interest bearing, at-risk capital contribution account in an amount equal to one percent (1.0%) of the aggregate limits of liability under the policy as approved (For program G only. For program F equal 1.3%, for program E equal 1.5%, for program D equal 1.9%, for program C equal 2.5%, for program B equal 3%, for program A equal 4%). For instance, a financial institution approved for a policy with an aggregate limit of liability in the amount of $1 million would deposit $10,000 into its capital contribution account with UKGC. Subject to the conditions of the policy, this contribution would not be refunded to the financial institution its withdrawal from the program.
In addition to the capital contribution deposit, the financial institution remits a periodic premium, which is based upon its risk-rating score in effect, and the actual amount of coverage in force. Nearly all financial institutions may quickly attract enough additional shares of UKGC to easily offset the cost of the program. In fact, most discover that deposit insurance contributes positively to the financial institution's bottom line.
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