More colleges are looking to life insurance for donations

WASHINGTON — Those involved in setting up insurance policies to benefit charities say that their plans differ from the controversial “investor owned” life insurance pitched by Barry Kaye. Unlike investor-owned policies, “there is no investor in our project,” said John Ridings Lee, chief executive of Management Compensation Group, a compensation and benefits consulting firm in Dallas. In February, the firm helped put together a $270 million insurance donation program for Oklahoma State University in Stillwater. Churches and hospitals long have benefited from insurance donation programs. But OSU is the first university to set up such a program, said Larry Reece, executive director of major gifts for OSU Athletics. The OSU program was set up at the suggestion of billionaire investor Boone Pickens, the founder of BP Capital Management LP, a Dallas private-equity firm. For its Cowboy Gift of a Lifetime program, Oklahoma State purchased $10 million life insurance policies on 27 wealthy donors. The policies, issued by Lincoln National Life Insurance Co. of Fort Wayne, Ind., are owned by the university, which is the sole beneficiary. The key to the success of the program is that OSU has a $270 million endowment that it used as collateral to finance the policies, Mr. Reece said. “A lot of schools can’t do that or don’t feel comfortable with that,” he said. Management Compensation Group is working on lining up similar deals worth more than $1 billion in proceeds for 25 to 30 other schools, Mr. Lee said. Collegiate Financial Services of Lexington, S.C., which provides financial services to university athletic departments, also is working with 25 to 30 colleges on similar programs, said national program director Mark Mullady. “Our program has been approved by all the insurance companies that we do business with,” he said. “They don’t have a problem with ours,” Mr. Mullady added. “They have a problem with Barry’s.” Sara Hansard