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Informational Memorandum
Subject:Insurance Considerations for E-Commerce Activities
Date of Memorandum:12/20/2001
Expiration Date:
Office:OE
Signed By:Smith, Roland
FCA Contact Person:Holland, Tom
Contact Phone:703-883-4484
List of Attachments:



INFORMATIONAL MEMORANDUM

December 20, 2001


To: The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Director
Office of Examination

Subject: Insurance Considerations for E-Commerce Activities


Many Farm Credit System (FCS) institutions have introduced E-Commerce products and services to meet the needs of their customers. But, E-Commerce may result in additional risk for FCS institutions to manage. Because insurance can be a key component of a risk management strategy, FCS institutions should evaluate the level of their current insurance to ensure adequate coverage for the risk of E-Commerce activities. Your evaluation should consider the following:

Traditional fidelity bond coverage may not cover losses related to E-Commerce.
Availability, cost, and covered risks of E-Commerce-specific policies vary by insurance carrier.
Losses exceeding the insured limit of present insurance could materially impact your institution’s capital position.
Insurance supplements, but does not replace sound internal controls.
Damage to your institution’s reputation cannot be controlled by insurance coverage.

The National Credit Union Administration recently issued a letter addressing common questions on E-Commerce and insurance coverage. Many of the issues highlighted in the letter apply to FCS institutions. You can obtain a copy of that letter at the following link:
http://www.ncua.gov/ref/letters/01-CU-12.pdf

If you have any questions about this memorandum, please call Tom Glenn, Special Examination and Supervision Division, Office of Examination, at (703) 883-4412, or correspond with him on his e-mail address Glennt@fca.gov.