Florida Insurance Dept., in About-Face, Works to Ease Reins on Bank

Florida's Department of Insurance is close to dismantling a law that blocks banks from selling annuities, a move that could open up a rich market to some of the nation's biggest banks.

The insurance department has been meeting with Florida's banking department and the federal Office of the Comptroller of the Currency to iron out matters involving regulation of banks' annuity sales efforts, according to Dennis Silverman, the insurance department's senior counsel.

"We're working together on a compatible system" to supervise banks and their employees who will sell annuities, Mr. Silverman said. He said a plan for easing restrictions on bank annuity sales should be complete by fall.

Such a move would be a dramatic shift for the insurance department, which for years has criticized and disciplined banks that tried to offer annuities, either on their own or in partnership with firms set up to help them enter the field.

Mr. Silverman emphasized that the department hasn't backed away from its conviction that annuities - tax-advantaged investment products that provide an income stream upon retirement - must be sold carefully in a bank setting.

The department, under its new commissioner, C. William Nelson, will remain "very vigilant" about policing bank annuity salespeople, he said.

Industry observers said the agency is revising its policy in the wake of a January decision by the U.S. Supreme Court that concluded annuity sales are a permissible activity for national banks.

Observers also said the departure in January of insurance commissioner Tom Gallagher, who spearheaded the drive against bank sales, spurred the reappraisal, though Mr. Silverman disputed this point.

Among the companies that stand to benefit from a policy shift are First Union Corp., NationsBank Corp., SunTrust Banks, and Barnett Banks Inc., which dominate the Florida banking scene and have made no secret of their desire to expand annuity sales.

Barnett has recently had to rein in its annuity sales activities under the existing rules. That's because its marketing partner, James Mitchell & Co. of San Diego, has been locked in a battle with the Florida insurance department over alleged violations of state regulations.

Last week, the insurance department ordered Mitchell & Co. to severely limit sales and advertising of annuities offered through Barnett branches. Mitchell is seeking a stay while appealing the order.

"We are evaluating the appropriate next step: whether we should continue to sell with a third party or sell directly," said a spokesman for Barnett, which is based in Jacksonville.

Industry observers said other states that restrict bank annuity sales are bound to feel a ripple effect if Florida loosens its rules.

"This puts ongoing pressure on the entire system," said David Roderer, a partner at the Washington law firm of Winston & Strawn. Connecticut, Massachusetts, and Illinois are among the dozen or so states that ban or severely restrict annuity sales in banks.

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