WASHINGTON - National banks have won the right to sell annuities throughout Connecticut - the insurance industry's home field.

The Connecticut Insurance Department agreed late Wednesday to settle part of a lawsuit Shawmut National Corp. had filed last year challenging state restrictions on bank insurance activities.

As part of the deal, Shawmut agreed that all employees who sell annuities will apply for licenses from the department. The state agreed that all currently licensed Shawmut employees can broker annuities without reapplying for permission.

Both parties expect the bank to start offering annuities within 90 days.

"It is certainly a very positive development for us, because it gives us a chance to start selling annuities in Connecticut, which is an important market for us," Shawmut general counsel Michael Shepherd said.

Any national bank that agrees to license its annuity sales brokers can enjoy a similar deal, Connecticut Attorney General Richard Blumenthal said Thursday.

"One of the interests of the state was to ensure that any sales of annuities were subject to statutory protections for consumers," Mr. Blumenthal said. "That was one of the achievements of the settlement."

Mr. Blumenthal said his office will propose legislation this fall giving state banks the same power.

Gerald M. Noonan, president of the Connecticut Bankers Association, said he expects the legislature will comply, noting it came within eight votes last year of repealing the state prohibition.

"We should be in an excellent position," Mr. Noonan said. "It will be a question of working out the details. I would be hard pressed to think we won't win at this point."

Banking observers hailed the settlement, which comes six months after the U.S. Supreme Court struck down a Florida ban on national bank annuity sales.

"Connecticut, along with a couple of other states, are the most powerful strongholds of the insurance industry and for them to be able to read the handwriting on the wall is a major accomplishment," said Michael Crotty, deputy general counsel for litigation at the American Bankers Association.

Connecticut is home to Aetna Life and Casualty Co., Travelers Insurance Co., and many other major insurers.

"This is a great accomplishment," said Michael D. White, president of the Financial Institutions Insurance Association. "It is a further indication that state insurance departments are responding to the Supreme Court's decision. It is about time."

Robert Taylor, a partner at Day, Berry & Howard, the law firm that represented Shawmut, said negotiations began last week and occurred on and off until Wednesday.

The state settled because it feared a federal judge would rule that it cannot interfere with national bank annuity sales, he said. That would have left Connecticut without any regulatory oversight, according to Mr. Taylor.

Three Connecticut insurance associations also signed the agreement.

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