Section 13-02-14-03 - Limitations1. A bank is not authorized to purchase life insurance policies for the bank's own account as an investment. 2. Except as provided in subsections 3 and 4, the bank's purchase of life insurance policies underwritten by one company cannot exceed fifteen percent of the bank's tier 1 capital. 3. The bank's purchase of any life insurance policy underwritten by one company for key person purposes cannot exceed twenty-five percent of the bank's capital stock and surplus as measured by the policy's cash surrender value. 4. The bank's purchase of any life insurance policy underwritten by one company on a director cannot exceed ten percent of the bank's capital stock and surplus as measured by the policy's cash surrender value. 5. The bank's purchase of life insurance policies from all carriers in the aggregate cannot exceed twenty-five percent of the bank's tier 1 capital. This limit shall apply to the initial purchase of life insurance policies as measured by the amount of premium and to subsequent purchases as measured by the sum of the cash surrender value of earlier purchases plus the amount of premium committed toward subsequent purchases. 6. The bank is not authorized to purchase life insurance policies for the primary purpose of providing estate planning benefits for bank insiders unless it is part of a reasonable compensation package. 7. The bank's authority to hold life insurance on any key person ceases when the key person is no longer employed by the bank, or no longer meets the definition of key person. 8. The bank's authority to hold life insurance on a director ceases when that director is no longer a member of the board of directors and there is no liability or obligation under director compensation and benefit plans. 9. The bank's authority to purchase life insurance on borrowers is subject to the following: a. The face value of the life insurance policy cannot exceed the borrower's obligation to the bank. b. The bank has not charged off nor is expected to charge off the borrower's obligation. 10. In purchasing life insurance in connection with employee compensation and benefit plans, the bank may retain the policies after the insured's employment is terminated, provided the bank has continuing liabilities or obligations under such plans. N.D. Admin Code 13-02-14-03
Effective April 1, 1992; amended effective April 1, 2003.General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-03-02