The National Association of Insurance Commissioners is hammering out deals with federal and state banking agencies that could let regulators share authority over companies that sell banking and insurance products.

The group is negotiating deals with the Office of Thrift Supervision, the Office of the Comptroller of the Currency, and the Conference of State Bank Supervisors.

John B. Chesson, the group's senior legislative counsel, said it also met with the Federal Reserve Board when it was considering the merger of Citicorp and Travelers Group.

The Citi-Travelers merger presented the Fed "with insurance problems, and they recognized that they didn't have insurance expertise," he said.

Under the financial reform bill, HR 10, considered by Congress this year, state insurance regulators would have lost some authority.

Speaking on a panel at a National Conference of State Legislatures meeting here Thursday, Mr. Chesson said the bill would have preempted too many state laws and virtually barred state insurance regulators from reviewing affiliations between banks and insurance companies. State insurance commissioners prefer the status quo and would rather gamble that any future court decisions will not hurt them as badly as the bill would, he argued.

"Signing on to HR 10 is the equivalent of committing suicide today because we are worried about being mugged next year," Mr. Chesson said.

Functional regulation-or the division of supervision according to financial product rather than institution-will only work if "people will roll up their sleeves and work together," he added. If the deals the insurance group is working on are successful, "then we don't see the need for a broad piece of legislation."

Bert Ely, president of Ely & Co., a bank consulting firm in Alexandria, Va., said the group is simply being realistic.

"Insurance companies and the states have just lost time and time again" battles to keep the industries separate, he said. "They realize they've got to accept that the world has changed, and they've got to figure out a way to make the world move smoothly."

Citigroup is just one recent example of the line between the two industries blurring. Many insurance companies own thrifts, and there are 20 applications from insurance companies pending before the OTS. In November the agency let the nation's largest property and casualty insurer, State Farm Mutual Automobile Insurance Co., launch a full-service savings bank.

In November, for the first time, the comptroller's office said banks in Louisiana could sell insurance in large metropolitan areas as long as the operations are based in a place of 5,000 or fewer people.

The first of the insurance group's cooperative efforts bore fruit this month, when the OCC reached an agreement with the Oklahoma Insurance Department to share consumer complaint information. The group negotiated alongside Oklahoma officials and plans to use the agreement as a model that will be pitched to all states next year.

The pending agreement with thrift regulators goes beyond consumer complaints, said Scott M. Albinson, special assistant to the OTS' deputy director.

Slated to be completed over the next few months, the agreement would let the OTS and the insurance group share financial information about companies as well as any regulatory and enforcement actions that have been taken. "We're not in the business of regulating insurance companies," Mr. Albinson said.

A spokeswoman for the Conference of State Bank Supervisors said that in seven states, bank regulators have working agreements with their insurance counterparts and that the two trade organizations are designing a model for all other states.

That model could be finalized when the state bank supervisors group holds its annual meeting in June.

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