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

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

W.R. Berkley Corp. will receive approximately $15.5 million in cash and securities from CCB, that it expects to realize upon the closing of InsurBanc's holding company, Peyton Street. The corporation also received 493,051 preferred shares of CCB.

The IIABA said it will remain a minority shareholder in InsurBanc.

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

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

W.R. Berkley Corp. says the company has the right to require its chairman and CEO to purchase its CCB shares for an amount equal to or about $1.5 million. The company can do this at any time prior to the third anniversary of the closing of the transaction.

Berkley acquired InsurBanc in 2001 for $22 million.

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

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

Insurance companies are divesting their thrifts because, under the Gramm-Leach Bliley financial services reform law, they are now subject to stronger scrutiny.

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

W.R. Berkley Corp. justified its divesture of the thrift because, as a savings and loan holding company, W.R. Berkley would have become subject to enhanced regulation by the Fed, says the proxy statement.

That meant Berkley would have become subject to certain prior-notification requirements and restrictions on dividends, stock repurchases, distributions, transactions with affiliates and compensation plans and additional requirements related to its shareholders, management reporting and capital adequacy.

“Accordingly, the board concluded that, given the de minimis nature of the banking operations of InsurBanc to the Company and the adverse consequences of these enhanced restrictions, the company should divest its banking operations so that it could deregister as a savings and loan holding company as soon as possible,” the company says in the proxy statement.

Robert Rusbuldt, IIABA president and CEO, tells PC360 the new structure will strengthen InsurBanc’s ability to serve the independent agent system and provide “an attractive source of additional capital to lend to agencies across the country.”

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

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

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

CCB was listed as a troubled bank at the end of 2012 by the Investigative Reporting Workshop of the American University Communication 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 total troubled asset ratio at mid-year 2012 was over 90 percent, according the American University group, although it dropped below 80 by the end of the year.

Special Reports /

W.R. Berkley Sells Interest in InsurBanc to a Bank He Chairs

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