1. (a) Fidelity bond. Each credit union shall purchase and maintain a blanket fidelity bond covering the officers, directors, employees, committee members, and its agents, against loss caused by dishonesty, burglary, robbery, larceny, theft, holdup, forgery or alteration of instruments, misplacement or mysterious disappearance. All carriers writing credit union blanket bonds must be authorized by the Insurance Commissioner for the state of Texas as an acceptable fidelity on bonds in this state.

   1. (1) The amount of coverage to be required for each credit union shall be determined by the credit union's board of directors, based on its assessment of the level that would be safe and sound in view of the credit union's potential exposure to risk. In making its determination the board shall be guided by the following minimum required amount of fidelity bond coverage for any single loss computed according to asset categories:
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   2. (2) Any aggregate limit of liability provided for in a fidelity bond policy must be at least twice the single limit of liability. This requirement does not apply to optional insurance coverage.
   3. (3) The following maximum amounts of blanket bond deductibles are authorized according to asset categories:
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   4. (4) A deductible may be applied separately to one or more insuring clauses in a blanket bond. No deductible will exceed ten percent of a credit union's unencumbered reserves and undivided earnings unless the credit union creates a segregated Contingency Reserve for the amount of the excess. Valuation allowance accounts, e.g., allowance for loan losses, may not be considered part of the unencumbered reserves and undivided earnings when determining the maximum deductible.
   5. (5) The commissioner may require additional coverage of any credit union when, in his opinion, the fidelity bond in force is insufficient to provide adequate fidelity coverage. It shall be the duty of the board of directors to obtain the additional coverage within 30 days after the date of written notice of the findings by the commissioner.
   6. (6) After the effective date of this section, any bond coverage purchased or renewed by any credit union shall conform to this section.
2. (b) Cancellation. A fidelity bond must include a provision requiring written notification by the fidelity to the commissioner prior to cancellation of any or all coverages set out in the bond which includes a brief statement of cause for termination.
3. (c) Other insurance. Each credit union shall, subject to approval by the board, purchase appropriate insurance coverages to insure the credit union and its assets against loss or damage by fire, liability, casualty or any other insurance risks.
4. (d) Board review. The board of directors of each credit union shall formally approve the credit union's bond and insurance coverages. In deciding whether to approve the coverages, the board shall review the adequacy of the standard coverage and the need for supplemental coverage. Documentation of the board's approval shall be included as part of the minutes of the meeting at which the board approves coverages. Additionally, the board of directors shall review the credit union's bond and insurance coverages at least annually to assess the continuing adequacy of coverage.
5. (e) Review by fidelity company. Credit unions which are analyzed by a fidelity company shall notify the commissioner of the analysis within 30 days of the review commencement. The report of the review is to be provided to the commissioner upon request. The confidentiality of the report shall be preserved in the same manner afforded a report of examination conducted by the department.
6. (f) Insuring organization's bond requirements. As applicable, a credit union shall also comply with all bond requirements imposed by an insuring organization as a condition to maintain insurance on share and deposit accounts, including, the minimum fidelity bond specifications contained within Part 741.201 of the NCUA Rules and Regulations.

Source Note:The provisions of this §91.510 adopted to be effective August 14, 2000, 25 TexReg 7633; amended to be effective July 11, 2004, 29 TexReg 6628.