Senate Bill No. 509, introduced by Senator Cloud, aims to establish regulations regarding bank-owned life insurance by enacting R.S. 22:920. The bill defines "bank-owned life insurance" as life insurance purchased by a bank on the life of an employee for specific purposes, such as providing a death benefit to the employee's beneficiary or offsetting the costs of employee benefit plans. It also clarifies that a bank maintains its insurable interest in the life of a former employee, allowing for the exchange of bank-owned life insurance policies of the same type and death benefit amount without requiring written consent from the former employee.

The proposed law retains existing provisions that allow banks to purchase life insurance policies on employees when they have a substantial economic interest in the employee's life. Additionally, the bill includes technical amendments made during the Senate floor discussions, which streamline the language and remove the consent requirement for policy exchanges. The effective date for this legislation is set for August 1, 2026.