News & Publications

  • REGULATORY DEVELOPMENT
    • SEC’s Final “Clawback” Rule – Potential 409A Issues

  • REGULATORY DEVELOPMENTS
    • Agencies Extend Comment Period on Proposed Rules to Strengthen Large Bank Capital Requirements
    • Federal Reserve Board Finalizes Capital Requirements for Supervised Insurance Organizations
  • JUDICIAL DEVELOPMENTS
    • MOVEit Data Breach Litigation – Update
  • ACCOUNTING DEVELOPMENTS
    • IRS Issues Final Regulations to Update Pension Plan Mortality Tables
  • OTHER DEVELOPMENTS
    • Basel Committee on Banking Supervision Report on 2023 Banking Turmoil

  • REGULATORY DEVELOPMENTS
    • Basel III Endgame Proposal – Update
  • OTHER DEVELOPMENTS
    • NAIC Financial Condition (E) Committee – Framework for Regulation of Insurer Investments

Banking and Investment Veteran Jon Reining Joins MB Schoen & Associates as Managing Director, Business Development

  • TAX DEVELOPMENTS
    • IRS Sets Hearing Date for Reportable Policy Sale Proposed Rules
  • JUDICIAL DEVELOPMENTS
    • Litigation Related to the MOVEit Data Breach

  • REGULATORY DEVELOPMENTS
    • Banking Regulators Release Proposed Updates to Basel III Capital Rules
  • TAX DEVELOPMENTS
    • IRS Reportable Policy Sale Proposed Update – Review of Comment Letters Submitted
  • OTHER DEVELOPMENTS
    • CA Attorney General Seeks Information from Employers on Compliance with CCPA
    • Society of Actuaries U.S. Individual Life COVID-19 Reported Claims Analysis

  • TAX DEVELOPMENTS
    • IRS Reportable Policy Sale Proposed Rule – Update
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Finalize Interagency Guidance on Third-Party Relationships
    • Bank Regulatory Policy Update
    • FRB Releases Results of Annual Bank Stress Tests
  • LEGISLATIVE DEVELOPMENTS
    • Senate Banking Committee Members Propose Bill to Claw Back Executive Compensation
  • JUDICIAL DEVELOPMENTS
    • COI Litigation – PHL Variable Granted Summary Judgment

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • Reportable Policy Sale Proposed Update
  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – Jury Finds in Favor of Plaintiffs

  • REGULATORY DEVELOPMENTS
    • FSOC Proposes Updated Analytic Framework and Guidance on Nonbank Determinations
  • TAX DEVELOPMENTS
    • IRS Revenue Ruling – No Step-up Basis if a Trust’s Assets Are Not Includible in Gross Estate
  • OTHER DEVELOPMENTS
    • US DOL Reaches Settlement with Prudential Regarding Denied Claims
    • First Republic Bank Put into Receivership – JPMorgan Chase to Assume Substantially All Assets

  • REGULATORY DEVELOPMENTS
    • Potential Bank Regulatory Response to Signature and Silicon Valley Bank Failures
  • LEGISLATIVE DEVELOPMENTS
    • Data Privacy Act Passes House Financial Services Committee
  • JUDICIAL DEVELOPMENTS
    • Lincoln National COI Litigation – Proposed Settlement
  • TAX DEVELOPMENTS
    • Biden Budget Proposal
  • OTHER DEVELOPMENTS
    • Silicon Valley Bank and Signature Bank BOLI Holdings

Banking Industry Veteran Carol Polasky Joins MB Schoen & Associates as Managing Director, Business Development

In February 2023, MBSA became SOC 2, Type 1 Certified.

  • REGULATORY DEVELOPMENTS
    • NAIC Releases Draft Privacy Model Law for Insurance
  • OTHER DEVELOPMENTS
    • SECURE 2.0 Creates New Opportunity to Use Surplus Pension Assets for Retiree Welfare Benefits
    • U.S. Unveils New Economic Sanctions on Russia

We did not identify any subjects warranting coverage in our monthly LRA Update.

  • LEGISLATIVE DEVELOPMENTS
    • Consolidated Appropriations Act Enacted
  • TAX DEVELOPMENTS
    • IRS Notice 2023-7 – Initial Guidance Regarding Corporate Alternative Minimum Tax
  • JUDICIAL DEVELOPMENTS
    • Athene v. American General, et al. – COLI SVP Dispute Settled
  • OTHER DEVELOPMENTS
    • BCBS Evaluation of the Impact of Basel III Reforms

  • INSURANCE DEVELOPMENTS
    • ACLI Update on Life Insurance and Annuity Benefits in 2021

  • REGULATORY DEVELOPMENTS
    • FRB and FDIC Proposed Rule for Large Bank Resolution Requirements
    • SEC Adopts Final Clawback Rules
    • Federal Reserve Framework for Supervision of Insurance Organizations
  • JUDICIAL DEVELOPMENTS
    • Davydov (Et Al.) v. John Hancock – COI Litigation Update
  • TAX DEVELOPMENTS
    • IRS Notice 2022-55 – Qualified Retirement Plan Cost of Living Adjustments

  • REGULATORY DEVELOPMENTS
    • Banking Regulators Reaffirm Commitment to Basel III Standards
  • JUDICIAL DEVELOPMENTS
    • Davydov (Et Al.) v. John Hancock – COI Litigation Update
  • OTHER DEVELOPMENTS
    • Senate Finance Committee Continues Investigation into PPLI

  • LEGISLATIVE DEVELOPMENTS
    • Inflation Reduction Act of 2022
    • California Legislature Passes Unclaimed Property Voluntary Compliance Program
  • OTHER DEVELOPMENTS
    • Senate Finance Committee to Investigate Private Placement Life Insurance
    • NAIC Adopts Regulatory Considerations Applicable to Private Equity-Owned Insurers

  • LEGISLATIVE DEVELOPMENTS
    • Inflation Reduction Act of 2022
  • REGULATORY DEVELOPMENTS
    • FRB Regulation O FAQ – Split Dollar Life Insurance Arrangements

  • TAX DEVELOPMENTS
    • Biden Tax Policy Update
  • JUDICIAL DEVELOPMENTS
    • Voya Settles Class Action Regarding COI Increases

  • ACCOUNTING DEVELOPMENT
    • Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans

  • JUDICIAL DEVELOPMENTS
    • Athene v. American General, et al. – COLI SVP Product Dispute
  • REGULATORY DEVELOPMENTS
    • Financial Industry Associations Request Review of SA-CCR
  • TAX DEVELOPMENTS
    • Treasury Greenbook Released

  • TAX DEVELOPMENTS
    • Biden Administration Releases Fiscal Year 2023 Budget Proposal
  • JUDICIAL DEVELOPMENTS
    • Leonard v. John Hancock – Attorneys’ Fees Awarded in COI Litigation
  • LEGISLATIVE DEVELOPMENTS
    • Utah Passes Consumer Privacy Law

  • REGULATORY DEVELOPMENTS
    • SEC Proposes Cybersecurity Rules for Investment Advisers
  • OTHER DEVELOPMENTS
    • Russian Economic Sanctions Imposed

Banking Industry Veteran, Gerard “Jerry” Colaluca, Joins MB Schoen & Associates as Chief Bank Strategist

  • TAX DEVELOPMENTS
    • IRS Final Guidance on Transition from LIBOR to Other Reference Rates
    • IRS Notice 2022-06 – Determination of Substantially Equal Periodic Payments
  • REGULATORY DEVELOPMENTS
    • SEC Reopens Comment Period on Executive Compensation Proposal
  • JUDICIAL DEVELOPMENTS
    • Court Provides Preliminary Approval of Class Action Settlement in John Hancock COI Litigation
  • OTHER DEVELOPMENTS
    • Society of Actuaries Release U.S. Population Mortality Observations
    • Columbian Mutual Life Settlement with NY DFS for Failing to Pay Unclaimed Proceeds
    • FRB Invites Public Comment on Proposed Guidance for Supervision of Certain Insurance Organizations Overseen by the Board

  • LEGISLATIVE DEVELOPMENTS
    • Build Back Better Act Update
  • OTHER DEVELOPMENTS
    • ACLI Releases Update on Life Insurance Benefits During COVID-19 Pandemic

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • Tax Legislation – Update
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Release Computer-Security Incident Notification Final Rule

  • TAX DEVELOPMENTS
    • Tax Legislation – Update
  • JUDICIAL DEVELOPMENTS
    • John Hancock COI Litigation Settlement
  • REGULATORY DEVELOPMENTS
    • Proposed Interagency Guidance on Third-Party Relationships – Comments Submitted

  • LEGISLATIVE DEVELOPMENTS
    • Government Infrastructure and Tax Legislation Update
  • TAX DEVELOPMENTS
    • IRS Priority Guidance Plan – Additional Guidance for Reportable Policy Sales
  • REGULATORY DEVELOPMENTS
    • Bank Regulators Extend Comment Period on Proposed Risk Management Guidance for Third-Party Relationships

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • LEGISLATIVE DEVELOPMENTS
    • Government Infrastructure and Tax Legislation Update
  • ACCOUNTING DEVELOPMENTS
    • Bank Accounting Advisory Series Updated
  • JUDICIAL DEVELOPMENTS
    • USAA Class Action Settlement Approved

  • TAX DEVELOPMENTS
    • IRS Issues Private Letter Ruling Affirming that a Transfer of Insurance Policies from a Parent to a Subsidiary Retains Tax Exempt Status
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Release Proposed Interagency Guidance for Third-Party Relationships Risk Management

  • TAX DEVELOPMENTS
    • Groom Law Group Asks IRS to Provide Guidance on Repurposing Surplus VEBA Assets
  • LEGISLATIVE DEVELOPMENTS
    • Colorado Legislature Passes Privacy Law

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • Biden Releases FY 2022 Budget Proposal
    • Treasury Greenbook Released

  • TAX DEVELOPMENTS
    • Biden Administration Tax Policy Update
  • JUDICIAL DEVELOPMENTS
    • USAA Settles Class Action COI Complaint

  • LEGISLATIVE DEVELOPMENTS
    • Biden Administration Unveils Infrastructure Plan
  • REGULATORY DEVELOPMENTS
    • Congressman Waters Urges Regulators Not to Weaken Big Bank Capital Requirements

Finding relevant information about the BOLI/COLI market or topics can be frustrating and sporadic.  Certainly, there’s no shortage of information (and phone calls) about products and offerings, but what about the landscape of the industry and its risks?

 

Here you’ll find a complimentary version* of our BOLI Developments and Trends quarterly publication – an in-depth look at the market including ownership by asset size, transactions, and what types of investments banks are allocating to in their separate accounts. 

Beyond the industry analytics, there are counterparty strength ratings and a robust description of updates specifically impactful to BOLI owners or programs.  

 

*This complimentary version is available on a 1-year lag from the most up-to-date information.  Current versions are available via subscription. 

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • LEGISLATIVE DEVELOPMENTS
    • COVID Relief Legislation – American Rescue Plan (HR 1319)
    • Florida Consumer Privacy Bill (HB 969)
    • Virginia Consumer Data Protection Act (SB 1392)
  • REGULATORY DEVELOPMENTS
    • OCC Finalizes Rule Clarifying Role of Supervisory Guidance
    • Banking Regulators Finalize NSFR Rule

  • LEGISLATIVE DEVELOPMENT
    • Amendment to IRC §  7702 – Minimum Rate of Interest

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • Biden Administration’s Business Tax Priorities

  • LEGISLATIVE DEVELOPMENTS
    • California Privacy Rights Act of 2020 Approved by Voters
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Issue Statement on LIBOR Transition
    • Banking Regulators Publish Sound Practices to Strengthen Operational Resilience

  • REGULATORY DEVELOPMENTS
    • Banking Regulators Release Final Rule for TLAC Holdings of Advanced Approaches Banks
  • TAX DEVELOPMENTS
    • IRS Private Letter Ruling Regarding Investor Control Doctrine
  • LEGISLATIVE DEVELOPMENTS
    • SAFE DATA Act Introduced in the Senate
    • New Jersey Enacts Law Prohibiting STOLI

  • JUDICIAL DEVELOPMENTS
    • Andresen v. Guggenheim Partners – COLI Commissions Litigation
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Finalize Corrections to the SA-CCR
  • LEGISLATIVE DEVELOPMENTS
    • California Consumer Privacy Act (CCPA) – Extension of Temporary Exemption for Employee Data

  • ACCOUNTING DEVELOPMENTS
    • OCC Bank Accounting Advisory Series Updated
  • OTHER DEVELOPMENTS
    • Managing Mortality Costs within COLI/BOLI Programs – Publication
    • BIS Revisions to the Principles for the Sound Management of Operational Risk

  • JUDICIAL DEVELOPMENTS
    • Athene v. American General, et al. – SVP Litigation Update
  • TAX DEVELOPMENTS
    • IRS Proposed Regulations on Tax-Exempt Organization Excess Executive Compensation

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – Vogt v. State Farm Jury Verdict Upheld upon Appeal
  • REGULATORY DEVELOPMENTS
    • American General Settlement with Massachusetts re Death Claim Interest
    • Financial Regulators Finalize Changes to Volcker Rule
    • California Consumer Privacy Act (CCPA) – Proposed Regulations Package Submitted to Office of Administrative Law
  • OTHER DEVELOPMENTS
    • Effects of Experience Rating on COLI/BOLI Programs – Publication
    • NAIC Releases Update on State Insurance Regulatory Response to COVID-19

  • JUDICIAL DEVELOPMENTS
    • Athene vs. American General, et al. – COLI SVP Product Dispute
    • COI Litigation Update – Proposed Settlement in Thompson vs. Transamerica

  • TAX DEVELOPMENTS
    • IRS Private Letter Ruling on Policyholder Implications of Assumption Reinsurance Transaction
  • OTHER DEVELOPMENTS
    • Athene to Pay $45 Million to NY for Unlicensed Pension Risk Transfer Business

  • LEGISLATIVE DEVELOPMENTS
    • COVID-19 Legislation
  • REGULATORY DEVELOPMENTS
    • Federal Reserve Board Issues Final Rule Establishing Stress Capital Buffer Requirement Intended to Simplify Capital Framework

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • IRS Revenue Ruling 2020-05 – Adjustments to Basis
    • Trump Administration Budget Proposal for FY 2021
    • House Ways & Means Committee Hearing – The Disappearing Corporate Income Tax
  • JUDICIAL DEVELOPMENTS
    • Transamerica COI Litigation Update
    • Athene vs. American General, et al. – COLI SVP Product Dispute

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • REGULATORY DEVELOPMENT
    • Agencies Propose Changes to Modify Volcker Rule “Covered Funds” Restrictions

  • JUDICIAL DEVELOPMENT
    • Athene vs. American General – COLI SVP Litigation Update

  • ACCOUNTING DEVELOPMENTS
    • Stable Value Protection Whitepaper
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Finalize Rule to Update Calculation of Counterparty Credit Risk for Derivative Contracts
  • LEGISLATIVE DEVELOPMENTS
    • Federal Privacy Legislation Introduced
  • JUDICIAL DEVELOPMENTS
    • Supreme Court of California Rules in Favor of Northwestern Mutual in Matter Relating to Policy Loan Interest Charges
  • TAX DEVELOPMENTS
    • IRS Private Letter Rulings for Fee-Based Non-Qualified Deferred Annuities

Some life insurance products that are currently being marketed for businesses may expose the policyholders to significant valuation adjustments (i.e., write-downs) for balance sheet and income statement purposes. The situation arises because some product offerings seek to apply a specific citation under GAAP that is at least somewhat unclear. However, the result of applying this specific citation (out of context) can be objectively and empirically shown to be counter to the underlying principle set forth under GAAP for these assets (addressed in ASC 325-30), which typically requires businesses to carry these assets at the net realizable value of the insurance contract.

 

The products in question seek to settle the insurance contract obligations over extended time periods, but, instead of complying with a specific rule that such extended payments are subject (by the policyholder) to discounting, the products seek to comply with GAAP under a provision that may be construed to not require a realizable value.

 

We ask a reader: Does an exception from discounting really mean that the policyholder can carry the asset at a demonstrably unrealizable value?

 

We then analyze the underlying GAAP as it relates to these assets and provide descriptions of the product structures that we believe are inherently lacking in substance. We also provide empirical examples of the structures.

 

In one of the empirical examples the interest credited during the extended settlement period was floored at zero for 5.5 years. This resulted in a total decrease of ~$2.3 million in the carrying value from when the policy termination was requested to the date that the contract’s defined interest rate rose above 0%. At the settlement date, it is worth noting that the product provider had no loss exposure whatsoever. When we discount the amount received by the riskless rate, we arrive at a realizable value closer to $87 million versus the purported carrying value of $100 million.

 

We conclude that the adoption of approaches that set aside the premise of net realizable value as the underlying foundation for the carrying value could result in undesirable financial reporting adjustments – potentially at very inopportune moments (e.g., when the amount of the restatement could be quite material).

  • TAX DEVELOPMENTS
    • IRS Releases Final Regulations for Certain Life Insurance Contract Transactions and Modifications to the Transfer for Valuable Consideration Rules
  • LEGISLATIVE DEVELOPMENTS
    • California Consumer Privacy Act – Notice of Proposed Rulemaking
  • REGULATORY DEVELOPMENTS
    • Agencies Finalize Changes to Simplify Volcker Rule
    • Banking Regulators Finalize Changes to Company-Run Stress Testing Rules

  • LEGISLATIVE DEVELOPMENTS
    • California Consumer Privacy Act – Amendment Passed
  • JUDICIAL DEVELOPMENTS
    • Athene vs. American General, et al. (COLI SVP Product Dispute) – Update
  • REGULATORY DEVELOPMENTS
    • FDIC Finalizes Capital Rule for Qualifying Community Banking Organizations

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • REGULATORY DEVELOPMENTS
    • Regulators Approve Volcker Rule Revisions
  • JUDICIAL DEVELOPMENTS
    • Athene vs. American General, et al. (COLI SVP Product Dispute) – Update
  • OTHER DEVELOPMENTS
    • North Carolina Enacts Law to Limit Insurers’ Investments in Affiliates
    • NY Supreme Court Upholds “Best Interest” Standard Adopted by NYDFS

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • REGULATORY DEVELOPMENTS
    • LIBOR Reference Rate Reform – Update
    • Regulatory Agencies Issue Final Rule Providing Reduced Reporting Requirements for Call Reports
    • Regulatory Agencies Issue Final Rule to Simplify Regulatory Capital Rules
  • ACCOUNTING DEVELOPMENTS
    • FASB Project to Consider the Effective Dates of Recent Amendments to Insurance Accounting
  • OTHER DEVELOPMENTS
    • NAIC ICOLI Data Disclosure Adopted
    • Uniform Mortgage-Backed Securities Issued by Fannie Mae, Freddie Mac

  • LEGISLATIVE DEVELOPMENT
    • California Consumer Privacy Act – Amendments

  • TAX DEVELOPMENTS
    • Comments Submitted to IRS Regarding Proposed Regulations for Certain Life Insurance Contract Transactions
    • Congressional Research Service Report on the Economic Effects of the 2017 Tax Revision
  • OTHER DEVELOPMENTS
    • NAIC Deliberations on Index Universal Life (IUL) Illustration Requirements

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

In March 2019, the IRS released proposed regulations for “Information Reporting for Certain Life Insurance Contract Transactions and Modifications to the Transfer for Valuable Consideration Rules.” The comment period extended to May 9, 2019.

Through our external counsel, Davis & Harman, we submitted a comment letter to the IRS seeking additional clarifications with respect to 1) BOLI Pooling Transactions; and 2) IRC § 1035 Exchanges.

  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – John Hancock Settlement Approved
  • OTHER DEVELOPMENTS
    • California Consumer Privacy Act (CCPA) – Rulemaking Update
    • NTIS Death Data Improvement Project – Update

  • TAX DEVELOPMENTS
    • IRS Releases Proposed Regulations on New Reporting Requirements for Certain Life Insurance Contract Transactions
  • OTHER DEVELOPMENTS
    • FFIEC Finalizes Revisions to Call Reports Relating to Changes in Accounting for Credit Losses
    • NTIS Death Data Improvement Project – Update

All institutional purchasers and sponsors of life insurance should have enough knowledge about the mortality costs, benefits and risks associated with corporate owned and bank owned life insurance (COLI/BOLI) programs. The required knowledge includes an understanding of the differences between experience-rated mortality designs and non-experience rated designs, since failure to make an informed decision in this area can result in enormous, yet avoidable, exposures to excessive costs. It is also important to understand some of the legal, regulatory and accounting considerations that impact mortality risks. Finally, it is important to understand some of the common misconceptions about these programs that have been fostered by disinformation.

 

This 3-part series of papers by Matthew B. Schoen and James P. Van Etten attempts to provide state of the art discussion to address these needs.

  • JUDICIAL DEVELOPMENTS
    • Athene vs. American General, et al. – COLI SVP Product Dispute
    • COI Litigation Update – John Hancock Proposed Class Action Settlement
    • COI Litigation Update – Feller vs. Transamerica
  • REGULATORY DEVELOPMENTS
    • Clarification Requested from IRS on Guidance concerning Uniform Mortgage-Backed Securities for Purposes of IRC § 817(h)
  • OTHER DEVELOPMENTS
    • NYDFS Consumer Alert Regarding Universal Life Insurance Policies
    • NTIS Death Data Improvement Project – Update
    • Insurance Industry Statement Regarding Fiduciary Standard

  • ACCOUNTING DEVELOPMENTS
    • Whitepaper on BOLI SVP Accounting Implications
  • REGULATORY DEVELOPMENTS
    • Basel Committee Finalizes Market Risk Capital Framework
  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – John Hancock Proposed Class Action Settlement
  • OTHER DEVELOPMENTS
    • California Consumer Privacy Act – Update
    • MetLife Regulatory Settlements with New York and Massachusetts re Pension Benefits and Assumed Variable Annuity Guarantee Reserves

Presently, there are several companies looking to issue Stable Value Protection (SVP) for BOLI, and there appears to be significant interest by banks to evaluate and implement these solutions. We delve into some of the key accounting considerations of which BOLI owners should be mindful when evaluating these products.

Buyers must beware! SVP providers generally offer no assurances as to the accounting treatment of the SVP features they offer. As described in the paper, the implications of misunderstanding and mischaracterizing the GAAP treatment of an SVP feature could be severe.

  • Caveat Emptor: New BOLI SVP Features May Present Undesirable Accounting Implications
  • To access the full paper, please register or login.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – John Hancock Proposed Class Action Settlement
  • TAX DEVELOPMENTS
    • JCT Releases General Explanation of Tax Cuts and Jobs Act
    • Year-End Tax Package Passed by the House
  • REGULATORY DEVELOPMENTS
    • Bank Regulators Allow Three-Year Regulatory Capital Phase-in for New CECL Accounting Standard
    • FDIC Issues Notice of Proposed Rulemaking to Revise Company-Run Stress Testing Requirements
    • Regulators Extend Comment Period for SA CCR Proposal
  • OTHER DEVELOPMENTS
    • NTIS Death Data Improvement Project – Update

  • TAX DEVELOPMENTS
    • Brady Releases Tax, Oversight Legislation
  • REGULATORY DEVELOPMENTS
    • Banking Regulators Propose Capital Rule for Qualifying Community Banking Organizations
  • OTHER DEVELOPMENTS
    • “Best Interest” Standards – Updates
    • NAIC Statutory Accounting Principles (E) Working Group – Update
    • California Bill Requiring Notifications to Policyholders when an Insurer Changes Non-Guaranteed Elements
    • IRS Private Letter Ruling Regarding Long-Term Care Insurer Liquidation Process

A participant’s split dollar economic benefit is determined by multiplying a cost per $1,000 factor (based on the participant’s age) by the participant’s benefit under the split dollar arrangement, divided by 1,000. But how is the economic benefit determined when the arrangement involves a joint and survivor life insurance policy? We have observed diversity in practice with regard to how the economic benefit is computed for these types of arrangements. In particular, some computations include an interest rate discount factor of 2.5% when determining the cost per $1,000 rate whereas others do not. Is this factor appropriate? What is its purpose? Where did it originate?
This paper summarizes our research and findings as to whether a 2.5% discount rate factor is set forth by the IRS and/or otherwise appropriate to use.

  • REGULATORY DEVELOPMENTS
    • IRS Releases Guidance on Uniform Mortgage-Backed Securities for Purposes of § 817(h)
    • New Proposed Rule for Calculating Exposure Amount of Derivative Contracts
  • JUDICIAL DEVELOPMENTS
    • COI Litigation – Feller vs. Transamerica
    • COI Litigation – Davydov vs. John Hancock
  • ACCOUNTING DEVELOPMENTS
    • American Bankers Association Seeks Quantitative Impact Study and Delay in the Implementation of CECL
  • OTHER DEVELOPMENTS
    • California Consumer Privacy Act Amendment Signed into Law

After the 2017 inaugural survey, we received feedback from several participants on topics, length, and frequency of the survey. Most agreed the findings were valuable and encouraged us to repeat the survey in 2018.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also includes metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • JUDICIAL DEVELOPMENTS
    • COI Litigation Update – John Hancock Proposed Class Action Settlement
  • TAX DEVELOPMENTS
    • IRS Form 1099-R and Instructions – Reportable Policy Death Benefits
    • Tax Reform 2.0 – House Passes Three Bills

  • REGULATORY DEVELOPMENTS
    • Proposed Rules for Treatment of Certain Municipal Obligations as HQLA
  • ACCOUNTING DEVELOPMENTS
    • FASB Targeted Improvements to the Accounting for Long-Duration Contracts
    • FASB Proposes Narrow-Scope Improvements to Credit Losses Standard
  • JUDICIAL DEVELOPMENTS
    • COI Litigation Updates
  • OTHER DEVELOPMENTS
    • Comments on SEC Best Interest Standard for Broker-Dealer

  • TAX DEVELOPMENTS
    • House Ways and Means Chairman Brady Releases Tax Reform 2.0 Framework
  • REGULATORY DEVELOPMENTS
    • Economic Growth, Regulatory Relief, and Consumer Protection Act – Interagency Statement
  • OTHER DEVELOPMENTS
    • NAIC Continues to Review ICOLI Regulations
    • NY DFS Issues Final Version of Life Insurance and Annuity “Best Interest” Standard
    • Social Security Administration Announces Schedule for Release of Additional Records – Update

Can an “insurer’s lower published premium rates” be used to determine the Cost of Insurance Protection under a split-dollar arrangement entered into after September 17, 2003?

 

This report investigates whether or not it is permissible to use an insurer’s lower published premium rates (instead of using IRS Table 2001) when computing imputed income under the economic benefit regime for a non-equity split-dollar life insurance arrangement entered into (or materially modified) after 9/17/2003.

To which investment strategies are Separate Account BOLI owners allocating? As the economic landscape changes, will owners reallocate? Our ongoing study sorts SA portfolio allocations into 8 sector types and analyzes how the weights have changed over time. The study also include metrics and breakdowns on passive vs active management, risk-weight estimates, and proxy returns for the SA BOLI industry.

  • TAX DEVELOPMENTS
    • IRS Notice 2018-41 – Comments Submitted
  • REGULATORY DEVELOPMENTS
    • FRB Finalizes Single-Counterparty Credit Limits
  • JUDICIAL DEVELOPMENTS
    • COI Litigation – Vogt vs State Farm Insurance Company
  • OTHER DEVELOPMENTS
    • NAIC Statutory Accounting Principles (E) Working Group Focuses on Private Placement Variable Products – MBSA Comment Letter

In May 2018, the NAIC Statutory Accounting Principles (E) Working Group continued its deliberations on the regulatory treatment of Private Placement Life Insurance (PPLI) and Private Placement Variable Annuities (PPVA) products owned by insurers. Under the exposure, insurers that own ICOLI policies would need to meet two requirements in order to continue the current practice of recognizing the values fully as admitted assets: 1) The policies must comply with IRC §7702; and 2) The owner of the policy must not be subject to investment risk (meaning the net realizable value does not change as a result of market fluctuations). MBSA submitted a comment letter to the NAIC recommending a more comprehensive review of ICOLI as an asset class owned by insurers. We drew several references to bank regulatory guidance and ultimately recommended that the NAIC evaluate both the risk-based capital framework as well as whether or not the products qualify as admitted or non-admitted assets for statutory accounting purposes.

  • LEGISLATIVE DEVELOPMENTS
    • Economic Growth, Regulatory Relief, and Consumer Protection Act Signed into Law
  • REGULATORY DEVELOPMENTS
    • Federal Reserve Board Proposes Revisions to the Volcker Rule
  • OTHER DEVELOPMENTS
    • Social Security Administration Announces Schedule for Release of Additional Records
    • NAIC Statutory Accounting Principles (E) Working Group Focuses on Private Placement Variable Products – Update

  • LEGISLATIVE DEVELOPMENTS
    • Economic Growth, Regulatory Relief, and Consumer Protection Act Passes Senate
  • JUDICIAL DEVELOPMENTS
    • COI Class Action Complaint Against Security Life of Denver
  • OTHER DEVELOPMENTS
    • NAIC Statutory Accounting Principles (E) Working Group Focuses on Private Placement Variable Products
    • NAIC Annuity Suitability (A) Working Group – Update

  • TAX DEVELOPMENTS
    • IRS Priority Guidance Plan – Initial Implementation of Tax Cuts and Jobs Act
  • JUDICIAL DEVELOPMENTS
    • BB&T v. MassMutual – Case Voluntarily Dismissed
  • OTHER DEVELOPMENTS
    • MB Schoen Publication – Tax Reform Analysis: Economic Impact on BOLI

While the recent enactment of tax reform did not directly change the tax treatment of BOLI (i.e., cash value growth remains tax deferred and death benefits generally remain tax free), the reduction of the corporate tax rate from 35% to 21%, effective January 1, 2018, significantly impacts the economic attributes of BOLI. In this paper, we analyze the magnitude of impact in an effort to answer the question of whether the lower tax rates are likely to cause widespread surrenders.

  • TAX DEVELOPMENTS
    • Interagency Statement on Accounting and Reporting Implications of the New Tax Law
  • REGULATORY DEVELOPMENTS
    • FFIEC Approves Burden-Reducing Revisions to Call Reports as Previously Proposed
  • OTHER DEVELOPMENTS
    • Evolving “Best Interest” Standards for Life Insurance and Annuities
    • MetLife SIFI Designation Legal Challenge Dismissed

We recommend to anyone considering a BOLI purchase, or a change in program administrator, to undergo a competitive RFI process to choose their vendor. We’ve compiled an extensive list of questions posed to us by banks using a BOLI vendor RFI approach in the past. We are making it available to you in the hope that it serves as a foundation for your own vendor RFI. Use those questions that are germane; lose the rest. We are available to help you to further tailor the RFI to compel disclosure of the information essential to meeting your specific needs.

  • TAX DEVELOPMENTS
    • Implications of Tax Cuts and Jobs Act (TCJA) for BOLI/COLI
  • JUDICIAL DEVELOPMENTS
    • FNB PA Voluntarily Dismisses Appeal versus Transamerica
  • OTHER DEVELOPMENTS
    • U.S. Banking Agencies Support Conclusion of Reforms to International Capital Standards
  • AD HOC LRA – DECEMBER 18, 2017
    • Tax Cuts and Jobs Act – Summary of Final Bill Text

While we are pleased with the level of participation in this initial tally (demographics follow), and hope you share our view that the findings include valuable insights, we hope, over the succeeding years, to achieve broader participation, increasing the value of each yearly installment. We’ve done our best to present the results without bias.

  • TAX DEVELOPMENTS
    • Senate Expected to Pass Tax Reform Bill
  • REGULATORY DEVELOPMENTS
    • Proposed Revisions to the Consolidated Reports of Condition and Income for June 30, 2018
  • LEGISLATIVE DEVELOPMENTS
    • Financial Regulatory Reform – Senate Banking Committee Announces Agreement
  • AD HOC LRA – NOVEMBER 2, 2017
    • House Releases the Tax Cuts and Jobs Act
  • AD HOC LRA – NOVEMBER 6, 2017
    • Tax Cuts and Jobs Act Summary
  • AD HOC LRA – NOVEMBER 13, 2017
    • Tax Cuts and Jobs Act Summary – JCT Description of Senate Finance Committee Chairman’s Mark
  • AD HOC LRA – NOVEMBER 16, 2017
    • Tax Reform Passes House
  • AD HOC LRA – NOVEMBER 27, 2017
    • Tax Cuts and Jobs Act Summary – Senate Proposal’s Legislative Text

  • TAX DEVELOPMENTS
    • House Tax Reform Legislation Status
  • REGULATORY DEVELOPMENTS
    • OCC Bulletin 2017-45 – Proposed Technical Changes to Annual Stress Test Regulations
    • OCC Bulletin 2017-47 – Proposed Rules to Simplify Capital Rules
  • OTHER DEVELOPMENTS
    • NY Enacts New Requirements for Life Insurance Non-Guaranteed Elements
    • BOLI Publication – Author Advocates for Elimination of BOLI/COLI Tax Advantages

  • TAX DEVELOPMENTS
    • IRS Private Letter Ruling on Policyholder Implications of Assumption Reinsurance Transaction
    • Tax Reform Framework Released
    • Senate Budget Committee Releases Fiscal Year 2018 Budget Resolution
  • REGULATORY DEVELOPMENTS
    • Comment Letter re BOLI Exclusion under Volcker Rule
    • Banking Regulators Propose Simplifications to the Capital Rules
  • JUDICIAL DEVELOPMENTS
    • Transamerica COI Litigation – Jury Awards Damages to Plaintiffs
    • Lincoln COI Litigation Update
  • OTHER DEVELOPMENTS
    • Senate Passes FSOC Insurance Member Continuity Act
    • FSOC Rescinds Non-Bank SIFI Designation of AIG
    • NJ Passes Law Requiring Life Insurers to Use Federal Death Master File to Identify Potential Matches

In August 2017, the OCC requested comment on whether certain aspects of the Volcker Rule’s implementation regulation should be revised to better accomplish the purpose of the rule and decrease the compliance burden on banks. The Volcker Rule specifically prohibits investments in an issuer that would be an investment company, as defined in the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that Act. Most private placement separate account BOLI references those same exemptions from registration. However, as part of the initial development of the rule, variable separate account BOLI was provided an exemption, subject to meeting certain conditions. In our comment letter, we recommended two additional clarifications to the existing BOLI exemption.

  • REGULATORY DEVELOPMENTS
    • OCC Seeks Public Input on Volcker Rule
    • Regulatory Capital Treatment of Certain Centrally-Cleared Derivative Contracts
  • ACCOUNTING DEVELOPMENTS
    • Bank Accounting Advisory Series – Update
  • JUDICIAL DEVELOPMENTS
    • FNB PA Appeals District Court Ruling in Favor of Transamerica

  • JUDICIAL DEVELOPMENTS
    • FNB PA v. Transamerica – Summary Judgement Ruling
  • TAX DEVELOPMENTS
    • Joint Statement on Tax Reform
  • OTHER DEVELOPMENTS
    • Basel Consultative Documents Regarding Short-Term Securitizations

  • REGULATORY DEVELOPMENTS
    • Treasury Report on Financial Regulation
    • FDIC Adopts Supervisory Guidance on Model Risk Management
    • Proposed Revisions to Call Reports – No Impact on BOLI
  • LEGISLATIVE DEVELOPMENTS
    • H.R. 10 – The Financial CHOICE Act
  • OTHER DEVELOPMENTS
    • Nebraska Department of Insurance Releases COLI Group Life Form Filing Requirement

  • TAX DEVELOPMENTS
    • Trump Fiscal Year 2018 Budget Proposal
  • LEGISLATIVE DEVELOPMENTS
    • Proposed Bill to Clarify Tax Treatment of Certain Life Insurance Contract Transactions
    • H.R. 10 – The Financial CHOICE Act
    • Connecticut Law Allows Domestic Insurers to Divide

  • TAX DEVELOPMENTS
    • Trump Tax Reform Proposal – Core Principles
  • LEGISLATIVE DEVELOPMENTS
    • House Financial CHOICE Act
  • OTHER DEVELOPMENTS
    • FHFA Single Security Initiative – Update
    • MetLife Seeks Delay in SIFI Case

  • JUDICIAL DEVELOPMENTS
    • Lincoln COI Class Actions
  • REGULATORY DEVELOPMENTS
    • FDIC Vice Chairman Hoenig on a Market-Based Proposal for Regulatory Relief and Accountability
  • OTHER DEVELOPMENTS
    • NAIC Working Group Suspends Work on Unclaimed Life Insurance and Annuities Model Act

  • TAX DEVELOPMENTS
    • Treasury Department Report on Tax Treatment of Life Insurance Inside Buildup
    • IRS Private Letter Ruling – Variable Contracts (for Individuals) Satisfy Investor Control Rules
  • REGULATORY DEVELOPMENTS
    • Federal Reserve Board Releases Scenarios for CCAR and Dodd-Frank Stress Tests
    • Executive Order on Core Principles of Financial Regulation
  • JUDICIAL DEVELOPMENTS
    • COI Litigation – Proposed Class Action Against Lincoln National
    • Ongoing BOLI-Related Litigation – Procedural Updates

  • JUDICIAL DEVELOPMENTS
    • Cost of Insurance Litigation – Palumbo v. Nationwide
    • FNB PA v. Transamerica and Clark Consulting – Update
  • OTHER DEVELOPMENTS
    • IRS Proposes Updated Mortality Tables

  • REGULATORY DEVELOPMENTS
    • IRS Private Letter Rulings that Business Trust Portfolio Composed of Underlying Funds Satisfies Investor Control Rules
  • JUDICIAL DEVELOPMENTS
    • FNB PA vs. Transamerica and Clark Consulting – Update
  • OTHER DEVELOPMENTS
    • NAIC Fall National Meeting