Magazine article American Banker

Bankers Have Skills for Risk Underwriting, First Bank Exec Says

Magazine article American Banker

Bankers Have Skills for Risk Underwriting, First Bank Exec Says

Article excerpt

HONOLULU -- Bankers anxious to enter the insurance underwriting field ought to begin now by offering letters of credit and financial guarantees on such products as industrial and municipal revenue bonds, according to a First Bank executive.

"Bankers have the skills necessary to underwrite these products already," said Mark W. Sheffert, executive vice president, First Bank System Inc., Minneapolis.

Furthermore, he said during an interview here at the annual convention of the Bank Marketing Association, "bankers are already taking these risks."

Following a talk he gave at the convention, he said, "Banks do letters of credit, but they show up on the balance sheet as contingent liabilities."

He added, "If an insurer does one, it shows up as a reserve."

Mr. Sheffert is in charge of First Bank's proprietary insurance agency, FBS Insurance, which has been in operation since 1929. First Bank is one of 16 bank holding companies whose insurance agency activities were grand-fathered in 1956.

In his prepared remarks, he noted that First Bank is thinking of combining the features of an annuity product with an individual retirement account as well as an IRA completion policy. IRA completion insurance is designed to complete the investment in the event of premature death or disability. For about a year, FBS Insurance has been test-operating a joint venture with Colonial Penn in which auto and homeowner insurance premiums are deducted monthly from consumers' checking or savings accounts. Mr. Sheffert said the test "has exceeded our original expectations."

First Bank's insurance agents sell both commercial and consumer lines of insurance. The subsidiary underwent a major reorganization last year, shrinking the number of underwriters that agents deal with from 150 to about 30. It also shrank the number of agencies. …

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