Regardless of whether the product is company-owned, bank-owned, or insurance-owned, it typically consists of two fundamental components: a life insurance policy and its underlying investment strategy to meet the policy owner’s needs. The appeal of these products stems from the growing need for organizations to diversify their portfolios and generate returns that are less correlated with traditional assets and provide a better match for their employee-related liabilities. 

Several key factors have contributed to the growth of COLI, BOLI, and ICOLI products:

• Changing regulatory environment: The introduction of new regulations has created a more stable environment for COLI, BOLI, and ICOLI products.

• Specialization of distribution organizations: Specialty distributors are effectively serving the corporate, bank, and insurance markets while providing expertise in related non-qualified plan designs and investment options.   

• Innovations in product design: (Re)insurers and financial institutions have developed new and innovative COLI, BOLI, and ICOLI products that address specific needs and concerns. These products feature more expansive investment options, flexible premium structures, and enhanced creditor protection through the use of separate accounts.

• Increased use of private equity and alternative investments: The growth of private equity and alternative investments has created new opportunities for COLI, BOLI, and ICOLI products.  These additional investment options can be a better fit for policy owners and their liability profiles.

• Rising awareness and education: An increase in awareness and education about COLI, BOLI, and ICOLI products has helped to dispel misconceptions and build confidence among potential buyers.

As Executive Director of the National COLI Directors, I had the privilege of attending and hosting the National COLI Directors 2025 meeting in New York, where over 100 industry professionals gathered to network and share knowledge. Our discussions focused on the current growth opportunities and challenges in the COLI, BOLI, and ICOLI landscape. Despite some challenges, industry leaders unanimously agreed that this niche market is poised for continued growth. Let's start by examining the developments in Washington, D.C.

Tax reform is a top concern for COLI, BOLI, and ICOLI leaders, given its potential impact on interest rates, corporate tax rates, reserve requirements, and regulatory requirements. Many are wondering what the current White House administration has in store. At the meeting, Alex Kim, Vice President of Public Policy at Finseca, addressed the new balance of power in the House of Representatives following the 2024 presidential election and the potential creation of a single tax bill. He also highlighted the challenges of securing bipartisan support and Congress’s need to address the national debt, which could have significant economic implications.

Other policy areas that Alex noted require close attention include:

• BASEL III: A set of international banking regulations where an unintended bias on BOLI issued by mutual insurers may negatively impact the broader BOLI marketplace.

• 162(m): A provision of the Internal Revenue Code that limits tax deductibility of executive compensation, which will be expanded to include the five highest-paid employees, including non-executives, starting in 2027.

• 1035s Exchanges on Inactive Lives: A tax-advantaged exchange of a life insurance policy for another policy, but when applied to inactive employees and pertinent state insurance laws, can create significant tax risks, transaction complexities, and reputational risks for the organization holding the policy.

While the industry prepares for regulatory impacts on COLI, BOLI, and ICOLI products, we continue to explore innovative solutions and drive growth. Matt Maier, Vice President at Lockton, shared valuable insights from the NQDC Survey, which provides benchmarking and best practices for companies leveraging non-qualified deferred compensation plans. The survey revealed that HR leaders are seeking additional tools to attract and retain key employees, and COLI and BOLI products are increasing in popularity as a means to provide competitive benefits packages that help highly compensated employees defer income. Additionally, the survey highlighted the growing trend of plan sponsors setting aside assets through investment vehicles to meet future obligations.

We were also fortunate to hear from a panel of industry experts from Lincoln Financial, Golub Capital, SALI Fund Services, and Bain Capital share their insights on the growth in the ICOLI space. Since 2019, industry players have invested approximately $12 billion in ICOLI products, with $9 billion of that being in the private market. This trend is expected to continue, driven by large life companies and financial institutions purchasing in this space, as well as the formation of stronger partnerships between reinsurers, brokers, carriers, and asset managers to bring more effective solutions to clients. The shift towards private equity and private credit in ICOLI is also expected to persist, with buyers seeking higher-yielding assets. Keep in mind, for those looking to enter the ICOLI space, internal alignment within companies is crucial, with CFOs, HR leaders, and other key decision-makers needing to be on board with ICOLI strategies.