Pub. 7 2017-2018 Issue 2

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S September • October 2017 7 General Account BOLI Sales Dominate Market in 2016 BY DAVID SHOEMAKER AND KEN DERKS, EQUIAS ALLIANCE I n 2016, bank-owned life insurance (BOLI) sales fell $804 million from 2015 to $3.244 billion, but the percentage of bankswithBOLI policies increased to 62.2percent, up from 60.5 percent the year before. These are some of the findings from two separate reports on the BOLI market. The key reasons for the decline was in the purchase of both Hybrid Separate Account (HSA) and Variable Separate Account (VSA) products, where banks hold a portion of the investment risk. General Account (GA) products, where the cash surrender values (CSVs) are supported by the insur- ance company, dominated the BOLI market in 2016 with sales amounting to $2.948 billion or 90.9 percent of the total BOLI purchases that occurred last year, according to market research firmIBISAssociates. HSA sales amounted to only $149.3million in 2016 with VSA sales trailing slightly behind at $147.2 million. VSA purchases declined by $347million between 2015 and 2016 due to the lack of any large case sales. Larger banks tend to be the main purchasers of VSA products. New Premium& Case Sales The percentage of BOLI premiums invested in GA products has grown from 31.5 percent in 2012 to 90.9 percent in 2016. In contrast, HSA purchases have decreased in recent years. This is due to more GA product options, higher yields, and thehighcomfort level bankershavewith thegeneral cred- it-worthiness ofGAcarriers. VSApurchaseshavebeensomewhat erratic during the past few years and are still well below the vol- umes recordedearlier thisdecade. This isdue to the lower current yields, the reduced number of carriers offering these products, and the increased complexity of the product when compared to GA or HSA products. During thepastfiveyears, thenumberof individualBOLI sales has been relatively steady. The range during this period has been narrow with a low of 1,017 in 2015 and a high of 1,235 in 2013. The numbers below reflect the newBOLI cases that carriers have reported on their books.   continued on page 8