Bank Owned Life Insurance
Bank Owned Life Insurance (BOLI) is a policy where the bank is the owner, premium payor and beneficiary of a life insurance policy on the key employees or management team of the bank. These policies have a positive impact on the balance sheet in the first year and usually have a guaranteed rate of return less the mortality and expense charges.
These policies are purchased with the intent of offsetting the benefit costs for all the employees of the bank, or as part of a Supplemental Executive Retirement Program. The OCC, OTS and FDIC in a joint statement back in December 2004 (OCC 2004-56), defined the legitimate purposes of these types of policies. At the same time, the regulatory agencies have stated that it is best not to buy permanent insurance, a policy that has cash value, on a key employee if it is being used to solely indemnify that bank for the loss of that key employee.
Due to the highly regulated environment of these types of policies, it is our opinion at Schiff Benefits Group that an outside third party consultant provide the due diligence on the carriers that should be chosen as part of the BOLI purchase. As such, SBG only acts as the vendor in putting the product in place and choosing an outside consultant to perform the pre- and post- purchase analysis.
Our key employees at SBG have over 20 years of experience working in this highly specialized field prior to joining Schiff Benefits Group. For a more in depth overview of BOLI see our article on Frequent Uses of BOLI.