State of Kansas
State Bank Commissioner
Special Order 2005-1
This order, is hereby issued this 18th day of November, 2005, by the Kansas State Bank Commissioner (hereinafter "Commissioner") pursuant to K.S.A. 9-1715, as amended.
Whereas, pursuant to the Interagency Statement on the Purchase and Risk Management of Life Insurance, issued by The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision on December 7, 2004; and set out in the respective agency's issuances, including the Federal Deposit Insurance Corporation's Financial Institution Letter FIL 127-2004, (hereinafter referred to as "the Interagency Statement"), a national banking association and a federal saving association may purchase life insurance when such purchases are incidental to the business of banking, or useful in connection with the conduct of the association's business, are consistent with safe and sound banking practices, and are made in accordance with the guidelines in the Interagency Statement; and,
Whereas, no provision of Kansas law presently allows a state-chartered bank to purchase life insurance within the same parameters and for all of the purposes allowed for national banks and federal savings associations who operate in the same markets as state-chartered banks; and
Whereas, K.S.A. 9-1715, as amended, grants to the Commissioner the power to authorize state banks "to engage in any activity in which such banks could engage were they operating as any insured depository institution at the time such authority is granted..."; and,
Whereas, the Commissioner deems the issuance of this special order to be reasonably required to preserve the welfare of state banks and to promote competitive equality of state-chartered banks with other insured depository institutions;
It is therefore ordered, that notwithstanding any restrictions currently contained in the Kansas Banking Code, K.S.A. 9-501 et seq., Kansas state-chartered banks are hereby authorized to purchase and hold life insurance in a manner consistent with the parameters outlined in the Interagency Statement, and consistent with safe and sound banking practices;
It is further ordered, that Kansas state-chartered banks shall not invest in life insurance policies where the aggregate cash surrender value of the policies from any one insurance company would exceed 15% of the bank's capital, or where the cash surrender value of policies from all insurance companies would exceed 25% of the bank's capital unless approval is obtained from the Commissioner to exceed the limits, and that such limits shall apply both at the time of purchase and throughout the life of the insurance policies;
It is further ordered, that for purposes of this special order, "capital" shall consist of a bank's capital stock, surplus, undivided profits, allowance for loan and lease losses, capital notes and debentures, and reserve for contingencies;
It is further ordered, that the limitations prescribed in this special order shall not apply to any such life insurance policies in place before July 1, 1993;
It is further ordered, that Special Order 2003-1 is hereby revoked; and
It is further ordered, that pursuant to K.S.A. 9-1715(b), as amended, the terms of this special order shall become effective November 18, 2005 and shall remain in full force and effect until amended or revoked by the Commissioner.
It is so ordered.
State Bank Commissioner
Clarence W. Norris
