Sep 26, 2022
Bank Owned Life Insurance (BOLI)
purchases through the first half of 2022 continue to be elevated relative to historical standards, which has been a consistent trend since the second quarter of 2020. As of June 30, 2022, total BOLI owned by all US banks totaled $222.5 billion (1)
, which is a year-over-year increase of $10.8 billion.
The Interagency Statement on the Purchase and Risk Management of Life Insurance commits an entire section to the assessment of BOLI vendor qualifications, mandating each bank assess and verify that the vendor will be able to honor its long-term commitments. Given that BOLI policies typically remain on bank balance sheets for decades, banks purchasing BOLI should evaluate its advisor/administrator’s commitment to the future servicing of the policies. The BOLI vendor’s ability to honor long-term commitments is a key consideration in understanding the risk and success of a BOLI program.
One area of key focus for banks purchasing BOLI should be claims processing. The ultimate value of any BOLI policy is the value received at mortality. Your advisor/administrator’s commitment to providing the resources necessary to ensure the claim process is managed efficiently without undue costs and risks to the bank should be a part of every bank’s BOLI risk assessment. Questions to ask include:
- What is being done to assist in the identification of claims and how frequently?
- What does your advisor/administrator do once a claim has been identified?
As a pioneer in the BOLI industry with large bank purchases dating back to the early 1990’s, Newport is already demonstrating that long-term commitment to our clients. We use both internally developed and external technology for the identification of claims. In 2021, our claims team processed over 3,100 claims with associated death benefits totaling $1.3 billion.
As you assess your advisor and administrator’s qualifications and their ability to design, implement and administer your BOLI program, it’s vitally important that you understand their long-term commitment to the program including a focus on who will provide claims processing and at what cost to your bank.
To find out more about how our team works clients to ensure each claim is processed accurately and in a timely and efficient manner, contact Scott Bethune at (336) 369-2270.
(1) Source: 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