By 1986 it had become apparent that shrinking capacity, restricted coverage, and escalating rates in the marketplace for directors' and officers' liability insurance (D&O) had created a problem for savings institutions. It was determined that a non assessable mutual insurance company could be established which would:

1. make its members less vulnerable to the peaks and valleys of the insurance underwriting cycle

2. would support and help to stabilize the commercial insurance marketplace

3. would generate some much needed additional capacity.

In response to a letter dated October 21, 1988 from special counsel Baker & McKenzie, the Federal Home Loan Bank Board acknowledged that investment in a mutual insurance company for the purpose of obtaining D&O coverage and Keogh/lRA insurance coverage, was necessary, convenient and appropriate to the expressed powers and authority granted to Federal Savings & Loans and Savings Banks under the Federal Homeowner's Loan Act of 1933, as amended, and the implementing regulations there under, and lies within the implied and incidental powers and authority under well-settled principles of general corporate law.

The New York State Banking Department also acknowledged that contributions to and membership in an offshore mutual company by New York State charted Savings & Loans and Savings Banks was regarded as necessary and appropriate in conducting their business and was therefore authorized under Banking Law.

To meet these objectives, First Monetary Mutual Limited, was incorporated by 33 New York institutions as a mutual insurance company in Bermuda in November, 1986 and began operations on 28 January 1987.

In response to an inquiry from special counsel Shumaker Williams, P.C., the Commonwealth of Pennsylvania Insurance Department issued a favorable ruling on 3 December, 1999 for First Monetary to do business in the Commonwealth of Pennsylvania for the limited purpose of providing coverage for association members.