Institutional insurance provides protection and risk management

By Keith McDonagh
Keith McDonagh is Head of the Institutional Solutions businesses for MassMutual.
Posted on Sep 18, 2017

As companies successfully grow, the need for competitive and affordable employee benefit programs becomes more acute in order to attract the talent needed to further propel that business success.  Institutional life insurance solutions are specifically designed to help companies fund these important benefit program needs.

The most common institutional insurance solutions are bank owned life insurance (BOLI) and corporate owned life insurance (COLI).  With these insurance solutions, a business purchases life insurance on a group of highly compensated employees.

The long-term policy proceeds can be used to fund various employee benefit programs that a company may not otherwise be able to offer, such as health and welfare benefits, retirement programs and deferred compensation programs.  With the ability to affordably offer these benefits, companies can attract and retain the talented employees critical to their business success.  Additionally, as increases in policy cash accumulation values are not subject to current tax, this insurance provides a tax‐efficient means to fund or offset rising employee benefit costs.

Current demand for BOLI and COLI remains strong, as the underlying business need continues to grow.  U.S. employers’ cost to provide employee benefits, measured as a percentage of pay, increased 24 percent between 2001 and 2015, according to an analysis by Willis Towers Watson.1 The increased costs largely arise from a doubling in health care benefit costs, the study reported.

What should customers look for in choosing an insurer to fulfill their institutional insurance needs?

  • Financial Stability: Customers seek insurers with the highest financial strength ratings in the industry.2 Since institutional insurance policies can be in-force for decades, it is important to have an insurer that will be there for the long run.  A mutual company taking a long-term view is aligned with these characteristics.
  • Institutional Expertise: Customers seek insurers with decades of BOLI/COLI specific experience in meeting the needs of institutional market clients.  This experience helps ensure the right solution for the customer need and demonstrates the insurers’ risk management capabilities.
  • Investment Management:  For competitive crediting rates, customers seek insurers with large highly-diversified investment portfolios and proven asset management capabilities.
  • Customer Focus: Ease of doing business is a differentiator, from the underwriting and issuance processes through ongoing administration and service.  Customers want efficient service and an experience designed for institutional clients that fully meets their needs.

As benefit costs climb, more banks and corporations look to institutional life insurance as a sound solution.  By making good choices, BOLI/COLI can be a resourceful and tax-efficient way to finance benefit program costs.

MassMutual has been a leader in these markets for decades, helping financial institutions and businesses to diversify their approach to protection, benefit funding and risk management.  Recently, we introduced a new COLI solution (ElectrumSM) for small and medium-sized employers to insure their highly compensated employees and help fund non-qualified deferred compensation plans.  Our leadership in the institutional insurance markets directly reflects our financial strength, expertise, and market commitment.

If you’d like to learn more about how institutional insurance can help your company, speak with your insurance advisor.  If you don’t have one, we’d be happy to refer you to a qualified insurance broker.  Your agent will know MassMutual.

1 Willis Towers Watson, https://globenewswire.com/news-release/2017/07/18/1047888/0/en/Employers-cost-to-provide-employee-benefits-has-risen-24-since-2001-Willis-Towers-Watson-analysis-finds.html

2 Financial strength ratings for Massachusetts Mutual Life Insurance Company and its U.S.-domiciled life insurance subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company, are as follows: A.M. Best Company, A++ (Superior); Fitch Ratings, AA+ (Very Strong); Moody’s Investors Service, Aa2 (Excellent); and Standard & Poor’s, AA+ (Very Strong). Ratings are as of 8/1/17 and are subject to change.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel.