Institutional Funding Solutions

Bank-owned Life Insurance

Banks purchasing Bank-Owned Life Insurance (BOLI) on their executive officers has become a very popular practice. In fact, over 2/3rds of all banks have purchased BOLI. Why? BOLI delivers efficient non-interest income on a tax-advantaged basis, provides much-needed life insurance coverage for executive officers, and is used to offset the cost of providing pre- and post-retirement employee benefits plans — if it’s done right. It’s a life insurance policy a bank can purchase to insure the lives of key employees. BOLI tax-advantaged income can help banks offset the rapidly rising costs of broad-based benefits or executive benefit programs. BOLI may also generate higher tax-equivalent yields than most traditional bank investments.

Corporate-owned Life Insurance

Corporate-owned Life Insurance (COL)I is a commonly used investment vehicle to finance deferred compensation plans. Companies use COLI as an asset that earns interest in coordination with participants’ deferred compensation accounts. The insurance nature of this investment vehicle allows the asset to earn interest on a tax-deferred basis, in contrast to traditional taxable mutual funds.

Insurance Company-owned Life Insurance

Life insurance owned by an insurance business is commonly known as insurance company-owned life insurance (ICOLI). Whether for a life and health or property and casualty provider, ICOLI is a viable structuring tool to enhance alternative asset allocations. ICOLI can offer multiple benefits for insurance companies when it comes to addressing immediate and future obligations, or simply enhancing a company’s overall financial position.

Since ICOLI is life insurance purchased on key persons, the insurance can deliver ancillary benefits to the company and key person(s) through split-dollar arrangements or can be used as a strategy to fund certain executive compensation plans to help reward, recruit, and retain key talent.

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