Although more rare than unfunded programs, self insurance also includes programs where funds are actually set aside to pay incurred losses These have several significant benefits including the following:

• 1.    Liability Accounting - By using a funded approach, the funding process goes hand in hand with an accounting system which establishes the amount of the liabilities. It is extremely useful to have an accurate measurement of year-by-year costs of operational losses - particularly as these risks grow relative to the bank’s size. This assessment ensures that significant unfunded and unrecognized liabilities are not accumulating under the self-insurance program. Furthermore, it is crucial that actuarial analysis is used for projecting losses and in determining loss reserves to avoid significant unfunded or unrecognized liabilities.

• 2.    Service and Product Pricing - An accurate accounting and assessment of costs associated with operational losses can be important in both pricing the institution's products and services and in determining those business areas which are profitable and those which are not.

• 3.    Investment of Funds - A funded program allows specific investment income to be earned on the funds comprising the funded loss pool. This, in turn, offsets the cost of the losses themselves.