The Office of the Comptroller of the Currency will hold a meeting next week with 16 state insurance regulators in an effort to iron out policy differences affecting bank insurance sales.
The meeting is scheduled for Wednesday, a day after the Supreme Court is to hear arguments in the so-called Barnett case, which challenges state regulators' ability to bar banks from the insurance business.
With the banking industry widely expected to win that battle, "insurance commissioners are beginning to recognize that bank insurance sales are inevitable," said David Roderer, a partner with the Winston & Strawn law firm.
"In order to maintain their regulatory control over insurance they have to work with the Comptroller of the Currency," said Mr. Roderer. "The more enlightened commissioners are looking for a solution rather than confrontation."
"Out of this meeting, we hope to get some degree of clarity of where the comptroller is going and what he wants to do" with bank insurance sales, said Arkansas Insurance Commissioner Lee Douglass. "It is a chance for some open dialogue rather than having to fight."
The meeting, proposed by Comptroller Eugene Ludwig in an Oct. 10 letter to Mr. Douglass, could delve into the licensing and regulation of banks that offer insurance products.
The case before the Supreme Court exposes the tension between the national bank regulator and state officials.
The justices must decide whether the McCarran-Ferguson Act gives states the authority to ban insurance sales by national banks, or if a provision in the National Bank Act prevails, permitting insurance sales in towns with fewer than 5,000 residents.
The case pits Barnett Banks Inc., which bought a Belleview, Fla., insurance agency in 1993, against the Florida Department of Insurance. Citing a state law that bars banks from the insurance business, the Florida department ordered insurance agents to stop selling for Barnett. About 15 states have similar laws.
Barnett challenged the order and lost in federal district and appeals courts. Owensboro National Bank, however, won a similar dispute with Kentucky officials.
The contradiction led the Supreme Court to accept the Barnett case, presumably leading to a definitive resolution this spring.
Banking lawyers are hoping the high court will follow a precedent it set in the Valic decision of January 1995 that allowed banks to sell annuities. The ruling deferred substantially to the comptroller's interpretation of the National Bank Act.
The meeting between federal and state regulators is the first step toward a more constructive relationship. To date, the Comptroller's office and state commissioners have done little more than argue about which side has authority over bank insurance sales.
Mr. Ludwig said in his letter that the regulators could use the opportunity to create a working group of banking and insurance regulators to address issues of common concern.
Mr. Ludwig could not be reached at his office or home for further comment.
Briget Polichene, general counsel to the Indiana Insurance Department, said she plans to discuss with OCC officials how states will license bankers that want to sell annuities or insurance, and how banks will explain the difference between insured and uninsured products.