BOLI Market Update

Dec 09, 2021

The COVID Economy has created a challenging earnings environment for banks.  Persistent low interest rates and high bank liquidity have caused many banks to look to bank-owned life insurance (BOLI) as an efficient and effective way to generate earnings. 

Through the nine months ending September 30, 2021, 596 different banks purchased BOLI, totaling $6B of new premium. In the nine prior years, annual total BOLI purchases averaged $2.9B. Consistent with a trend since the financial crisis, banks are focused on general account purchases, with over 94% of the 2021 premium funding general account product.¹ Newport’s experience indicates the trend of high demand for BOLI has continued into the fourth quarter.

As a result of this unprecedented demand for BOLI, several insurance carriers have curtailed their acceptance of new BOLI premium for the remainder of 2021. We expect to see continued carrier premium acceptance constraints in 2022.  If you or your clients are considering a 2022 BOLI purchase, establishing timing and premium expectations with carriers now is strongly advisable.

Newport continues to monitor legislative developments. To date, nothing in the recently passed or currently proposed legislation would directly impact BOLI. We are watching proposals around a corporate minimum tax for large corporations for any indirect impact on BOLI ownership.

Through November 2021, Newport has assisted banks in the design and implementation of over 50 new BOLI programs with first year premiums in excess of $1.7B. If your bank is considering a BOLI purchase, please contact Scott Bethune (336) 369-2270 or Justin Robertson (336) 369-2275 at Newport to discuss how we can assist.