Articles

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. 
 

¹Source: BOLITracker

This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Consult your own tax, legal and accounting advisors before making any decisions. Newport and its affiliates do not provide tax, legal or accounting advice.

Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance, and brokerage services. Securities are offered through Newport Group Securities, Inc., a dually registered investment advisor and broker dealer, member FINRA and affiliate of Newport Group, Inc. Securities in California are offered through Newport Securities Insurance Services. For more information on Newport Group Securities, Inc. or Newport Securities Insurance Services and services offered, please visit our website at www.newportgroup.com.


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Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services. 

Investment Advisory and fiduciary consulting services are offered through Newport Group Consulting, LLC, a registered investment adviser. Securities are offered through Newport Group Securities, Inc., a dually-registered investment advisor and broker dealer, member FINRA. Securities in California are offered through Newport Securities Insurance Services. For more information about Newport Group Consulting and its services, Newport Group Securities, Inc. or Newport Securities Insurance Services and services offered, please refer to our Form ADV Part 2, which is available by contacting us at 407-333-2905, visit our website at www.newportgroup.com, or advisorinfo.sec.gov.  

Newport Trust Company is a New Hampshire state-chartered trust company Newport Trust Company provides independent fiduciary and trustee services for employee benefit plans.

Newport Group Consulting, LLC, Newport Group Securities, Inc., and Newport Trust Company are subsidiaries of Newport Group, Inc., an Ascensus Company.