What Are ALCO Points Of Interest?
Pre-Purchase Analysis OCC Bulletin 2004-56 identifies the following issues to be considered prior to the purchase of life insurance: • Measure the need for life insurance • Quantify the amount of life insurance needed • Vendor selection • Carrier selection • Product selection • Benefit Analysis • Reasonableness of the compensation associated with the benefit plan • Risk Analysis • Alternatives • Document the Decision Risk OCC 2004-56 cautions a financial institution to consider the various risk factors associated with the purchase of life insurance. They are: • Transaction risk (not properly understanding or implementing the purchase) • Credit risk (carrier evaluation) • Interest rate risk (exposure to movement in rates) • Liquidity risk (access to cash, if necessary) • Compliance risk (possible violations of laws, regulations, business practices, ethics) The OCC, FDIC and other regulatory agencies follow this framework for evaluating the analysis and acquisition of life insurance by t
