Beyond banking regulations, are there limits on how much Bank Owned Life Insurance (BOLI) a bank can purchase?
Regardless of an institution’s charter, any BOLI program must comply with state insurable interest laws. The Executive Benefits Network can advise you in determining appropriate amounts of coverage based on state law and the composition of a potential insured group. Q: What other limitations exist to the purchase of Bank Owned Life Insurance (BOLI)? A: The OCC has been the lead regulator in this area. There are two basic tests: one based on benefits and one based on capital. The OCC has indicated that the gains from BOLI cannot exceed the costs they are intended to offset. The Executive Benefits Network can help you in determining conservative parameters for the purchase of BOLI. In addition, the OCC says that as a general rule, a bank should not invest more than 15% of its Tier I capital with any one company and no more than 25% of its Tier I capital plus 25% of the allowance for loan and lease losses in BOLI as a whole. The OCC views these as guidelines, while the OTS regards them as
