Having just got their feet wet in selling insurance, banks are now contemplating the day when they'll be able to plunge into underwriting.
Regulators have yet to give banks a green light to underwrite policies, and most bankers acknowledge that such powers could be years away.
But they were encouraged by the Office of the Comptroller of the Currency's decision last week to let banks create operating subsidiaries to house nontraditional businesses rather than having to operate through holding company subsidiaries.
"This isn't so far off," said Rick O. Bowman, president of U.S. Bancorp Insurance. "Instead of sitting around talking about it, we're saying, 'Let's build our business cases and start working on numbers.'"
In coming months, industry observers said, they expect to see banks exploring an array of joint ventures and start-ups that would give them a crack at the revenues that come from underwriting.
Ronald Glancz, a lawyer at Venable, Baetjer, Howard & Civiletti in Washington, predicted a spate of joint ventures within six months to a year. "Banks want to learn. That's the way they've always done things."
Indeed, one consultant said, insurance companies and banks are already putting out feelers.
"All the while banks have been attacked" by insurance agents,"you always had those conversations going on. You'll probably see pilot programs pretty quickly."
Some bankers say their experience as underwriters of credit life insurance has convinced them that the juicier fees paid for underwriting life insurance, reinsurance, automobile insurance, and other products are worth pursuing.
"It's all about modeling behavior," said James Eads, who oversees an insurance agency in his role as president of Signet Banking Corp.'s brokerage subsidiary. "All I have to do is predict a little bit better than the actuary at the insurance company does."
He said it wouldn't be a stretch for banks to master the core skill of an underwriter: sizing up risks and managing assets accordingly. "That's what banks do for a living" Mr. Eads said.
Still, not everyone is so sure banks ought to get into underwriting. "There will be a few banks that will get into underwriting and in a few years will decide it was not such a good move," said Jim Rensel, managing director, Quality Resource Assurance Group, Tempe, Ariz.
And many bankers say they need to move gradually.
"Underwriting is several years down the road once we have built a very significant distribution network," said Robert Evans, managing director of Fleet Financial Group Inc.'s insurance services division. "We then would entertain opportunities to partner with insurance carriers to share in the risk and profits."
One baby step banks could take: underwriting reinsurance, a form of insurance that carriers buy for their own protection. The primary insurer of life or property and casualty handles the bulk of the work, predicting when policyholders will die or when their property will get damaged.
"Reinsurance gives you a chance to be in the manufacture or underwriting part of the equation without the infrastructure costs," Mr. Evans said.