Magazine article American Banker

BT Plans to Expand Latin American Insurance Business

Magazine article American Banker

BT Plans to Expand Latin American Insurance Business

Article excerpt

In a bold and unusual move for a U.S. bank, Bankers Trust New York Corp. plans to build an insurance underwriting and sales business across Latin America.

The bank company said it has brought Latin American partners into its Chilean insurance and annuity underwriting subsi-diary-Consorcio Nacional de Seguros SA-in a bid to extend those operations both within Chile and throughout Latin America.

Last week, two Chilean health care companies-Cruz Blanca Prevision y Seguros SA and Banmedica SA-each bought a 25% stake in Consorcio Nacional for $109 million. Proceeds of the sale will be put into Bankers Trust earnings in the second and third quarters this year.

The two Chilean companies, which are part of wider Chilean business conglomerates, plan to use their Latin America networks to help expand insurance operations.

"The idea is to expand in Latin America, and we feel that Consorcio is the best vehicle for that expansion," said Juan Bilbao, senior managing director and head for Latin America at Bankers Trust.

Although other U.S. banks have pondered getting into the insurance business abroad, few have made any move to do so. Citicorp obtained Federal Reserve Board approval in 1985 and is said to be developing insurance operations in Latin America as well as in Europe. Citicorp officials were unavailable for comment.

Under Federal Reserve Board regulations, banks are allowed to underwrite and sell life insurance and annuities outside the United States. But the regulations also require banks engaging in such activity to deduct the full amount of their investment in insurance companies from their capital.

"The main constraint is just how much of a hit on capital a bank is prepared to take," said Paul Pilecki, a partner in the financial institutions group at the Washington-based law firm, Shaw, Pittman, Potts & Trowbridge.

The Bankers Trust strategy to develop insurance operations got mixed reviews from analysts. …

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