Banks and bank holding companies reported bank-owned life insurance assets of $103.9 billion in 2006, up almost 49% from $69.9 billion a year earlier, a new report says.
The large increase in reported BOLI assets was due largely to a Federal Reserve reporting requirement change, notes Michael White Associates LLC, Radnor, Pa., which compiled the report. Previously, the Fed mandated that banks report their BOLI assets only when they reached a level of 25% of “other assets” on their balance sheets. As of 2006, the Fed requires all BHCs and banks with assets over $500 million to report all their BOLI assets.
Without the additional BOLI amounts caused by the rule change, banks and BHCs would have actual BOLI growth of around $3.3 billion over 2005, reports Michael White, president of MWA. Actual BOLI assets would have been $67.4 billion, an annual growth rate of about 4.9%.
“So about 90% of the change was due to new reporters,” observes White.
The report covers data from 854 BHCs with consolidated assets of at least $500 million plus more than 7,800 commercial banks and FDIC savings banks.
As with corporate-owned life insurance, banks use BOLI to offset the cost of employee benefits such as health care insurance and retirement plans.