National banks may purchase and hold certain types of life insurance called bank-owned life insurance (BOLI) under 12 USC 24 (Seventh). Banks can purchase BOLI policies in connection with employee compensation and benefit plans, key person insurance, insurance to recover the cost of providing pre- and postretirement employee benefits, insurance on borrowers, and insurance taken as security for loans. The OCC may approve other uses on a case-by-case basis.

References
OCC=Bulletin

Bank-Owned Life Insurance (OCC 2004-56, December 2004)
This OCC Bulletin provides an overview for the Interagency Statement on the Purchase and Risk Management of Life Insurance, which provides general guidance regarding supervisory expectations, split-dollar arrangements, and the use of life insurance as security for loans.