In letters dating back to 2016 and 2017, several financial institutions submitted requests for an exemption or interpretation regarding application of the customer identification program (“CIP”) to insurance premium finance lending. Premium finance loans provide short term financing to borrowers to facilitate the purchase of property and casualty insurance policies.

The basis of the request was that there is a low risk associated with this type of lending since there is no cash value for the borrower. In response a 2018 Order was issued granting an exemption from the CIP rules for insurance premium loans extended by financial institutions to commercial customers. After this order was issued, a supplemental letter was sent to the Federal Banking Agencies (“FBA”) indicating that this CIP exemption should apply to all recipients of insurance premium loans, not just commercial borrowers.

In a new Order, the FBA and the Financial Crimes Enforcement Network (“FinCEN”) agreed, finding that there is a valid basis for an exemption to apply to all customers of premium finance lending. This Order supersedes the previous Order issued September 27, 2018.