Full text of Federal Reserve Bank of New York Circulars : 6888. Bank Holding Companies

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FEDERAL RESERVE BANK
O F N E W YORK

8|

Circular No. 6888

o

January 27, 1972

I

BANK HOLDING COMPANIES
Hearing on Insurance Underwriting Activities
Scheduled for March 24

To All Bank Holding Companies, and Others Concerned,
in the Second Federal R eserv e D istrict:

Following is the text of a statement issued January 26 by the Board of Governors of the
Federal Reserve System:
The Board of Governors of the Federal Reserve System today scheduled a hearing
for March 24 on five applications from bank holding companies seeking to engage in the
underwriting of credit life insurance and credit accident and health insurance.
The hearing will be conducted by the Board staff at the Federal Reserve Building,
20th Street and Constitution Avenue, Washington, D. C ., beginning at 10 a.m .
Insurance underwriting activities have not been determined 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 regula­
tory provision regarding underwriting activities. The five applications were filed sub­
sequent to that decision.
In addition to assisting the Board in deciding the pending applications, the hearing
is expected to facilitate possible rulemaking with respect to this form of insurance under­
writing activities.
A copy of the hearing notice is printed below. Written comments on the matter should be
submitted by April 10, 1972, and may be sent to our Bank Applications Department.
Alfred Hayes,
President.

of
Bankshares Life Insurance Company,
Phoenix, Arizona. Bankshares Life Insurance
The Board of Governors has received the
Company engages in the underwriting, as r e ­
following five applications filed pursuant to
insurer, of credit life and disability insurance
section 4(c)(8) of the Bank Holding Company
in connection with loans made by the creditAct (12 U.S.C. 1843(c)(8) and § 225.4 of the
extending subsidiaries of Hamilton Banc­
shares, Inc.
Board's Regulation Y (12 CFR 225.4) for prior
b.
First at Orlando Corporation, Orlando,
approval to acquire shares of companies en­
gaged in the underwriting, as reinsurer, of
Florida, has applied to acquire voting shares
of First at Orlando Life Insurance Company,
credit life insurance and credit accident and
Phoenix, Arizona. First at Orlando Life In­
health insurance also referred to as disability
surance Company proposes to engage in the
insurance.
a.
Hamilton Bancshares, Inc., Chattanooga, underwriting, as reinsurer, of credit life and
disability insurance in connection with loans
Tennessee, has applied to acquire voting shares
N O T IC E OF H E A R IN G




(Over)

made by the credit-extending subsidiaries of
First at Orlando Corporation.
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 under­
writing, as reinsurer, of credit life and ac­
cident and health insurance in connection with
loans made by the credit extending 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 under­
writing, as reinsurer, of credit life and ac­
cident and health insurance issued in connec­
tion 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 Insurance Company, Phoenix,
Arizona. Fourth Financial Insurance Company
engages in the underwriting, as reinsurer, of
credit life and disability insurance in connec­
tion with credit extensions by Fourth Financial
Corporation’ s subsidiary bank.
The Board has not heretofore adopted gen­
eral regulatory provisions regarding any in­
surance underwriting activities as closely r e ­
lated to banking. In addition to the issue
whether the above insurance underwriting
activities are closely related to banking, the
applications 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 com ­
panies to engage in underwriting credit life
and accident and health insurance might reduce
the cost of such insurance to custom ers. As
an example, the question arises whether there
are tax savings or savings inherent in or
attributable to increased efficiency in the r e ­
insurance form of operation involved here and
whether any part of such savings may be




passed on 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 in­
surance is purchased) and, the extent to which
holding companies desiring to engage in the
underwriting of such insurance might be re ­
quired to manage their own subsidiaries, as
distinguished from such management service
being provided by a nonaffiliated insurance
underwriter in return for a portion of the
total premiums on 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 20 th Street and Constitution
Avenue on March 24, 1972, beginning at 10 a.m .
Interested persons are invited to partici­
pate, either by presenting 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 in­
spection 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 publica­
tion 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 on this activity and insurance agency
activities, the Board in August 1971, announced
that it had deferred adoption at that time of
general regulatory provisions regarding insur­
ance underwriting activities as closely related
to banking. It is anticipated that the March 24,
1972, hearing will not only assist the Board in
its determination 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.