W. R. Berkley Corp. has sold its interest in InsurBanc—thesavings bank created by the Independent Insurance Agents &Brokers of America to serve independent agents—as part of a trendby insurance companies to divest their thrifts in an effort toavoid federal regulation.

The bank was sold to Connecticut Community Bank(CCB). William R. Berkley, chairman and CEO of W.R. BerkleyCorp., is also chairman of CCB.

W.R. Berkley Corp. will receive approximately $15.5 million incash and securities from CCB, that it expects to realize uponthe closing of InsurBanc's holding company, Peyton Street. Thecorporation also received 493,051 preferred shares ofCCB.

The IIABA said it will remain a minority shareholder inInsurBanc.

CCB named the president and CEO of InsurBanc, David W. Tralka,the president and CEO of CCB. All employees of InsurBanc willbecome employees of CCB.

The combined banks will have approximately $516 million in totalassets and employ a total of 119 individuals. The mission ofInsurBanc, will remain unchanged, executives said.

W.R. Berkley Corp. says the company has the right torequire its chairman and CEO to purchase its CCB shares for anamount equal to or about $1.5 million. The company can do thisat any time prior to the third anniversary of the closing of thetransaction.

Berkley acquired InsurBanc in 2001 for $22 million.

Berkley owns 75.5 percent of CCB, according to a filing with theSecurities and Exchange Commission.

The filing indicates the sale of InsurBanc to CCB became finalApril 1.

Insurance companies are divesting their thrifts because, underthe Gramm-Leach Bliley financial services reform law, they are nowsubject to stronger scrutiny.

Northwestern Mutual, Prudential Financial and MassachusettsMutual have all reduced their thrifts to trust banks in order toescape federal scrutiny as a thrift holding company.

W.R. Berkley Corp. justified its divesture of the thriftbecause, as a savings and loan holding company, W.R. Berkley wouldhave become subject to enhanced regulation by the Fed, says theproxy statement.

That meant Berkley would have become subject to certainprior-notification requirements and restrictions on dividends,stock repurchases, distributions, transactions with affiliates andcompensation plans and additional requirements related to itsshareholders, management reporting and capital adequacy.

“Accordingly, the board concluded that, given the deminimis nature of the banking operations of InsurBanc to theCompany and the adverse consequences of these enhancedrestrictions, the company should divest its banking operations sothat it could deregister as a savings and loan holding company assoon as possible,” the company says in the proxy statement.

Robert Rusbuldt, IIABA president and CEO, tells PC360the new structure will strengthen InsurBanc’s ability to serve theindependent agent system and provide “an attractive source ofadditional capital to lend to agencies across the country.”

“InsurBanc is better positioned now to serve the growing bankingneeds of our members and their clients,” says Rusbuldt.

Tralka says independent agents and brokers who may be in need ofadditional capital will find the bank has greater lending assets towork with than in the past.

“All clients will experience no change,” says Tralka. “Theproducts and people they deal with will all remain the same. Idon’t see why this is not a win-win for all.”

CCB was listed as a troubled bank at the end of 2012 by theInvestigative Reporting Workshop of the American UniversityCommunication School.

Both its assets and deposits dropped from 2011 compared to 2012,and loans 90-days past due more than double from 2011 to 2012.

Its capital plus reserves at the end of 2012 were $40.3 million,compared with total troubled assets of $30.1 million. Its totaltroubled asset ratio at mid-year 2012 was over 90 percent,according the American University group, although it dropped below80 by the end of the year.