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OTS Concludes Federal Saving Associations May Engage in Insurance Activities

August 9, 2006

On June 23, 2006, the Chief Counsel of the Office of Thrift Supervision issued an opinion that concludes that a federal savings association (FSA) may make a "pass-through" investment in a title insurance agency because a federal association has the incidental authority to engage in such activities.

As footnote 11 of the opinion notes, OTS regulations have permitted FSAs to have service corporations that engage in insurance agency activities, including title insurance, but the OTS had not previously determined:

  1. whether the FSA itself could act as a title insurance agent, and

  2. whether the FSA could make a "pass-through" investment in a title insurance agency.

A "pass-through investment" under the OTS regulations is an investment in an entity that engages only in activities that an FSA may conduct directly.

The letter notes that the OTS "has consistently indicated that federal savings associations engaging in insurance activities must comply with applicable sate insurance laws, including state licensing laws" (see fn. 34 on p. 8) and concludes on p. 9 that the Association that submitted the request "should satisfy itself that Title Agency is in compliance with all applicable sate insurance and other laws, including state insurance licensing laws."

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