Senate Bill No. 509, introduced by Senator Cloud, aims to establish regulations surrounding 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 an insurable interest in the life of a former employee, allowing for the exchange of bank-owned life insurance policies under certain conditions.

The proposed law stipulates that a bank may exchange a life insurance policy insuring a former employee for another policy of the same type and death benefit amount, provided that the former employee gives written consent for the exchange. This legislation is set to take effect on August 1, 2026, and retains existing laws regarding the bank's insurable interest in employees.