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BOLI Assets Keep Growing

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Separate account life insurance assets (SALI) composed the majority of total bank-owned life insurance (BOLI) assets in the three quarters for which data is available in 2011. The findings come on the heels of the MichaelWhite/Meyer-Chatfield Bank Owned Life Insurance Holdings Report.

The report, which was compiled by Michael White Associates LLC and sponsored by Meyer-Chatfield, strives to examine and quantify benchmarks of the cash surrender values (CSV) held by banks and bank holding companies. They also examine their ratios of CSV to capital.

BOLI is growing in popularity and all 6,740 commercial banks and FDIC supervised savings banks operating in the U.S. on September 30, 2011 reported data to the report.

SALI are the CSVs affiliated with separate account insurance policies whose CSVs are buttressed by assets that are kept separate from the general assets of the insurance carrier. Among the biggest banks (those with more than $10 billion in assets) SALI assets make up 60.3% of total BOLI assets, according to the report. SALI assets were concentrated among the largest banks and although SALI assets were the largest portion of BOLI assets, they were held by the fewest number of banks.

There were fluctuations from the first to the second quarter; the number of banks utilizing hybrid accounts (HALI), policies that combine features of both general and separate account insurance products that protect assets from claims on the insurer rose 7.2% from the first to the second quarter. HALI accounts are attractive options because the banks holding the accounts are able to choose the investment strategies where their premiums are invested. HALI accounts were a favorite among banks reporting BOLI assets.

The most commonly held policies were general account life insurance (GALI) policies. Institutions reporting their BOLI assets held $48.31 billion, representing 39.1% of total BOLI assets. GALI policies use the general assets of the insurance company issuing the policies to support their CSV.

This is the first year that information on SALI, GALI and HALI was made available and it the data was instrumental in forming a clearer picture of how BOLI is used and where trends are going.

Michael D. White, Ph.D., said “BOLI remains very useful and very popular, so it is consistent with that understanding that BOLI assets continue to grow.”