Monthly LRA Update: May 2026
Monthly LRA Update: May 2026
LEGISLATIVE DEVELOPMENT
Louisiana Proposed Legislation for BOLI 1035 Exchanges – Update
Last month, we described proposed legislation in Louisiana addressing banks’ rights to execute 1035 exchanges on policies covering former employees (SB 509). We had concerns with the proposal and engaged in outreach to try to improve the legislation. Our outreach included discussions and correspondence with the Louisiana Bankers Association, the insurance agent behind the legislation, and certain insurance companies.
After considerable discussion, an amended bill passed both the Louisiana House and Senate and was sent to Governor Landry on May 29.
The proposed law now has two primary elements:
- The current insurable interest statute is amended to explicitly state that a bank “shall be deemed to maintain its insurable interest in a former employee for the purposes of exchanging one bank-owned life insurance contract for another.”
- The law instructs the Louisiana insurance commissioner to “determine the method and manner in which a bank may obtain consent for the exchange.”
Louisiana’s legislature posts videos of its proceedings. The following videos include discussion of this bill:
- 2026-05-26 House discussion and passage
- LA House On-Demand Video
- SB 509 Coverage: 3H:35M to 4H:24M
- 2026-05-19 House Insurance Committee Deliberation
- LA House On-Demand Video
- SB 509 Coverage: First 59 minutes
- 2026-05-19 House Insurance Committee Deliberation
- LA House On-Demand Video
- SB 509 Coverage: From 7 min to 25 min
Among the legislators that voted against the bill, the concerns raised were primarily around consent and the handling of sensitive data. Of these, some appeared to believe that the insureds were the owners of the policies (e.g., in the context of a collateral assignment split dollar arrangement) and, therefore, consent should be required.
Among the legislators that voted for the bill, there appeared to be support for banks to be able to improve the performance of insurance assets without efforts to track down and/or reobtain consent from the insureds.
We will continue to monitor to see if Governor Landry passes or vetoes this bill. Assuming it passes, we will monitor for clarification from the Louisiana Department of Insurance as to consent requirements for former employees.