How Corporate-Owned Life Insurance (COLI) Supports Executive Benefits in 2026

In the competitive landscape of enterprise leadership, retaining top talent requires more than a standard salary. It demands robust benefits packages, often in the form of non-qualified deferred compensation or supplemental retirement plans. For financial institutions and other enterprises, Corporate-Owned Life Insurance (COLI) serves as the silent engine funding these commitments. (Variations specific regulated entities are Bank-Owned Life Insurance or BOLI and Insurance Company Owned Life Insurance or ICOLI.)

While the mechanics of COLI are well-established, the economic and regulatory environment surrounding it is not static. As we move into 2026, organizations must reassess their portfolios. The strategies that worked five years ago may not align with today's compliance standards or yield requirements. This article explores how COLI continues to support executive retention strategies and examines the critical shifts occurring this year.

The Role of Corporate-Owned Life Insurance (COLI) in Executive Retention

At its core, COLI functions as an institutional investment asset. A bank or corporation purchases life insurance policies on a group of key executives. The employer pays the premiums and is the beneficiary. The cash value of these policies grows tax-deferred, and if held until the death of the insured, the proceeds are tax-free.

This structure allows organizations to recover the costs associated with teammate benefit programs. For companies with over 100 employees, the aggregated cost of benefits for top-tier leadership is substantial. COLI provides a method to offset these liabilities without dragging down current earnings.

How COLI Funds Supplemental Executive Retirement Plans (SERPs)

The primary application of COLI is funding SERPs. These plans are vital for bridging the gap between qualified plan limits (like 401(k) caps) and the income replacement needs of high-earning executives. By generating a tax-equivalent yield that often outperforms traditional fixed-income investments, COLI enables companies to offer these attractive packages without severely impacting the balance sheet.

When an organization can confidently fund these obligations, it strengthens its position in the talent market. Executives look for stability and long-term security in their compensation packages. A well-structured COLI portfolio demonstrates that the company has the financial foresight to honor its long-term commitments.

Key COLI Trends in 2026

The fundamental tax advantages of COLI remain intact, but the operational landscape is shifting. In 2026, three specific areas demand attention: regulatory scrutiny, carrier consolidation, and interest rate adaptation.

Regulatory Oversight and Vendor Due Diligence in BOLI and COLI Programs

Bank regulators have had clear guidance for managing BOLI programs for years. Yet a "set it and forget it" mentality too often plagues BOLI administration.

Regulators expect institutions to maintain rigorous, documented processes for monitoring the creditworthiness of insurance carriers as well as the overall performance of the BOLI program. It is not enough to rely on ratings at the time of purchase. Boards and investment committees must demonstrate an active, ongoing review process. This shift requires more sophisticated data analytics and reporting capabilities to track carrier health in real-time.

Non-bank organizations would do well to adopt the best practices and guidance applicable to banks.

Insurance Carrier Consolidation and Risk Exposure

The insurance market has seen some consolidation. Mergers and acquisitions among carriers can alter the risk profile of existing policies. When two carriers merge, the resulting entity may have a different investment philosophy or administrative capacity.

For 2026, policyholders must evaluate how these market moves impact their current holdings. A carrier that was a strong performer in 2020 might now be part of a larger conglomerate with different priorities. Reviewing these relationships is essential to maintaining the expected performance of the asset.

Interest Rate Environment and COLI Portfolio Yield

After periods of volatility, 2026 presents a more stabilized interest rate environment, yet yields on new product issuances may differ from legacy policies.

Many older COLI policies have minimum crediting rates that are highly favorable compared to current market offerings. However, newer purchases must be modeled carefully against current yield curves. We see a trend where organizations are blending legacy blocks with new purchases to optimize the overall portfolio yield. Understanding the "spread" — the difference between the COLI yield and the cost of funds — is more critical now than ever for accurate earnings projection.

Data-Driven Management of COLI Assets

COLI is not just an insurance product; it is a financial asset that requires data-driven management. The "buy and hold" strategy is evolving into "buy and manage."

COLI Portfolio Audits and Stress Testing

Successful management in 2026 involves regular stress testing. Organizations should run scenarios that test how their COLI assets perform under various economic conditions, such as a sudden change in interest rates or a spike in mortality charges.

By utilizing advanced analytics, companies can identify underperforming policies. In some cases, a Section 1035 exchange — swapping an existing policy for a new one without triggering a tax event — might improve the yield or credit quality of the asset. This proactive approach turns a passive asset into an active contributor to the bottom line.

Aligning Finance and HR in Executive Benefits Funding

The finance department and HR often operate in silos regarding executive benefits. Finance manages the COLI assets, while HR manages the executive relationship. Effective strategy requires aligning these two functions.

If HR plans to introduce a new retention bonus or an enhanced retirement package to combat turnover, Finance must verify that the COLI assets are performing well enough to support these new liabilities. This collaboration allows the company to design compensation packages that are both competitive in the market and financially sustainable.

COLI Administration and Compliance in 2026

The administrative burden of COLI can be significant, especially for companies with hundreds or thousands of insured lives. Manual tracking of consent forms, death claims, and cash value reports is inefficient and prone to error.

Digital Platforms for COLI Portfolio Oversight

The trend for 2026 is full digital integration. Leading organizations are adopting platforms that aggregate policy data from multiple carriers into a single dashboard. This provides a unified view of cash surrender values, death benefits, and credit exposure.

Automated systems can also track "insurable interest" compliance. State law and tax regulations require that the employer has a valid interest in the life of the teammate at the time the policy is issued. As executives move roles or leave the company, keeping accurate records of who is insured and their status is vital for compliance and eventual claims processing.

Strategic Management of Corporate-Owned Life Insurance in 2026

COLI remains a powerful tool in the enterprise arsenal. It provides the financial efficiency necessary to support the high-value benefits that retain transformational leaders. However, the passive management styles of the past are ill-suited for the regulatory and economic reality of 2026.

Organizations must treat COLI with the same level of scrutiny and strategic planning as any other major asset class. By staying ahead of regulatory changes, actively managing carrier relationships, and leveraging data for decision-making, companies can secure the funding needed to keep their top talent engaged and committed for the long term.

Aligning COLI Assets with Executive Retention Strategy

As regulatory oversight, carrier structures, and interest rate conditions continue evolving in 2026, organizations can benefit from reviewing how Corporate-Owned Life Insurance (COLI) assets align with long-term executive benefit obligations. To explore how your COLI portfolio supports executive retention funding, connect with our Executive Benefits team.

Securities offered through Integrity Alliance, LLC, Member SPIC, Integrity Wealth is a marketing name for Integrity Alliance, LLC, RSC Insurance Brokerage, Inc. DBA Risk Strategies, Part of the Brown & Brown team, is not affiliated with Integrity Wealth.