[Deposit insurance involves catastrophe risk because bank failures spike during a banking crisis. Although mutual insurance is ill-suited for catastrophe risk, the U.S. government structures deposit insurance like a mutual company owned by policyholders. The mutual structure produces several...

Deposit insurance systems are designed to balance the benefits of preventing bank runs and protecting ordinary savers against the costs of reduced market discipline and potential burdens on taxpayers. Design flaws of deposit insurance make the benefits too low and the costs too high. This paper...