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F ederal R eserve Ba n k o f Dallas

DALLAS, TEXAS

75222
Circular No. 72-24
February 9 } 1972

NOTICE OF HEARING REGARDING
INSURANCE UNDERWRITING

To All Member Banks and Others Concerned
in the Eleventh Federal Reserve District:
The Board of Governors of the Federal Reserve System
has scheduled a hearing for March 24, 1972 on five applications
from bank holding companies seeking to engage in the underwriting
of credit life insurance and credit accident and health insurance.
Insurance underwriting activities have not been deter­
mined by the Board to be closely related to banking under Section
4(c)(8) of the Bank Holding Company Act. In August, 1971^ the
Board announced that it would not adopt at that time a general
regulatory provision regarding underwriting activities. The five
applications were filed subsequent to that decision.
The hearing will be held in the Federal Reserve Building
in Washington, D. C. Persons, in addition to the applicants, who
are interested in participating in the hearing by presenting
material orally, should contact the Regulations Department of this
Bank for pertinent information. Otherwise, comments on this matter
should be submitted to the Secretary, Board of Governors of the
Federal Reserve System, Washington, D. C. 20551; to be received
not later than April 10, 1972.
Enclosed is a copy of the Board's hearing order.

Yours very truly,
P. E. Coldwell,
President

Enclosure

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERAL RESERVE SYSTEM
[12 CFR Part 225]
[Reg. Y]
Bank Holding Companies
Notice of Hearing Regarding Proposed Acquisition
of Voting Shares of Companies Engaging in
Underwriting Credit Life Insurance and
Credit Accident and Health Insurance ;
and of Possible Rule Making

The Board of Governors has received the following five appli­
cations filed pursuant to section 4(c)(8) of the Bank Holding Company
Act (12 U.S.C. 1843(c)(8)) and § 225.4 of the Board's Regulation Y
(12 CFR 225.4) for prior approval to acquire shares of companies en­
gaged in the underwriting, as reinsurer, of credit life insurance and
credit accident and health insurance also referred to as disability
insurance.
a. Hamilton Bancshares, Inc., Chattanooga, Tennessee,
has applied to acquire voting shares of Banlcshares Life In­
surance Company, Phoenix, Arizona.
Bankshares Life Insurance
Company engages in the underwriting, as reinsurer, of credit
life and disability insurance in connection with loans made
by the credit-extending subsidiaries of Hamilton Bancshares,
Inc.
b. First at Orlando Corporation, Orlando, Florida, has
applied to acquire voting shares of First at Orlando Life In­
surance Company, Phoenix, Arizona. First at Orlando Life In­
surance Company proposes to engage in the underwriting, as
reinsurer, of credit life and disability Insurance in connec­
tion with loans made by the credit-extending subsidiaries of
First at Orlando Corporation.

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c. Northwest Bancorporation, Minneapolis, Minnesota,
has applied to acquire voting shares of Banco Credit Life
Insurance Company, Phoenix, Arizona,
Banco Credit Life
Insurance Company proposes to engage in the underwriting,
as reinsurer, of credit life and accident and health in­
surance in connection with loans made by the credit ex­
tending affiliates of Northwest Bancorporation,
d. Equimark Corporation, Pittsburgh, Pennsylvania,
has applied to acquire voting shares of Atlantic-Phoenix
Life Insurance Company, Phoenix, Arizona. Atlantic-Phoenix
Life Insurance Company engages in the underwriting, as re­
insurer, of credit life and accident and health insurance
issued in connection with loans made by Atlantic Management
Corporation, a wholly-owned finance company of Equimark
Corporation.
e. Fourth Financial Corporation, Wichita, Kansas,
has applied to retain voting shares of Fourth Financial In­
surance Company, Phoenix, Arizona. Fourth Financial Insur­
ance Company engages in the underwriting, as reinsurer, of
credit life and disability insurance in connection with credit
extensions by Fourth Financial Corporation's subsidiary bank.
The Board has not heretofore adopted general regulatory pro­
visions regarding any insurance underwriting activities as closely
related to banking.

In addition to the issue whether the above insur­

ance underwriting activities are closely related to banking, the appli­
cations suggest the need to explore further the public benefits aspects
of such acquisitions.
Among the specific questions in this area is the extent to
which permitting holding companies to engage in underwriting credit
life and accident and health insurance might reduce the cost of such
insurance to customers.

As an example, the question arises whether

there are tax savings or savings inherent in or attributable to increased
efficiency in the reinsurance form of operation involved here and whether

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any part of such savings may be passed o n to customers.

Further

questions are whether credit life and accident and health insurance
may be required by the holding company (regardless of from whom such
insurance is purchased) and, the extent to which holding companies
desiring to engage in the underwriting of such insurance might be
required to manage their own subsidiaries, as distinguished from such
management service being provided by a nonaffiliated insurance under­
writer in return for a portion of the total premiums o n insurance
written.
The Board has decided to explore these questions at a hearing
to be conducted by designated staff members of the Board at the Board
building at 20th Street and Constitution Avenue on March 24, 1972,
beginning at 1© a.m.
Interested persons are invited to participate, either by pre­
senting material orally at the hearing or through submission of written
comments on the matter to be received by the Board's Secretary on or
before April 10, 1972.

Such material will be made available for inspec­

tion and copying upon request, except as provided in § 261.6(a) of the
Board's rules regarding availability of information. ‘
In January, 1971, the Board's initial publication of proposed
activities under section 4(c)(8) included "acting as insurer for the
holding company and its subsidiaries with respect to insurance sold by
the holding company or any of its subsidiaries as agent or broker."
After a hearing o n this activity and insurance agency activities, the

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Board in August,

1971, announced that it had deferred adoption at that

time of general regulatory provisions regarding insurance underwriting
activities as closely related to banking.

It is anticipated that the

March 24, 1972, hearing will not only assist the Board in its deter­
mination of the pending applications, but will facilitate possible
rulemaking by the Board with respect to these activities.
Persons, in addition to the Applicants, who are interested
in participating in the hearing by presenting material orally, should
inform the Secretary of the Board in writing not later than March 9, 1972.
By order of the Board of Governors, January 21, 1972.
(Signed) Tynan Smith

Tynan Smith
Secretary of the Board
(SEAL)


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102