Admiralty Bancorp, a small Palm Beach, Fla., banking company, is using an alliance with the local unit of USI Insurance Services Corp. to get into the insurance business.

The company's $170 million-asset Admiralty bank this week began offering group health insurance to business customers as well as flood and windstorm insurance to consumers. It is making referrals to agents of USI Florida of Boca Raton.

"This is the first time we've offered insurance products at our bank," said Ward Kellogg, president and chief executive officer. He asserted a demand for such products in Florida, where "there are all kinds of problems with flood and windstorm insurance." He added that he expects demand from some of the "homeowners with very expensive homes who bank with us."

Mr. Kellogg said he expects eventually to offer auto and boat insurance.

The referral arrangement makes sense for a bank of Admiralty's size, said Carmen Effron, president of Westport, Conn.-based C.F. Effron Co., a banking and insurance consulting group.

"If you're a bank worth less than $500 million, you will have to do strategic alliances and be creative," Ms. Effron said. "A community bank can't afford to hire somebody to start a program like this. USI already has the relationship with the insurance carriers."

Ms. Effron said community bankers see an opportunity in insurance. A 1999 study by Grant Thornton of Chicago said 67% of the 815 community bank officials who responded to a survey said they planned to sell life insurance in the next couple of years.

"Most community banks are worried about, first, technology and, second, how do I start to sell insurance," Ms. Effron said.

Mr. Kellogg declined to predict how much revenue the insurance program would bring in but said he hopes to sell group health benefits to two clients a week as the program is being phased in.

"We also expect to sell property and casualty policies on a daily basis," Mr. Kellogg said.

San Francisco-based USI Insurance has operations in 21 states and annual revenue of about $350 million.

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