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Best’s Special Report: Insurer Membership in Federal Home Loan Bank Grows as Life/Annuity Companies Capitalize on Investment Spreads

U.S. life/annuity (L/A) insurers increased their borrowing through the Federal Home Loan Bank (FHLB) program by 22% in 2022, as they looked to capitalize on enhanced yields in the higher interest rate environment, according to a new AM Best report.

U.S. insurance companies now represent nearly 9% of FHLB membership, following a 4% growth uptick last year by insurers. However, the Best’s Special Report notes that the vast majority of insurance companies do not have access to secured FHLB loans made available through the program. During 2022, only 22% of U.S. life/annuity (L/A) insurers had borrowing access, compared with nearly 7% of the property/casualty (P/C) segment and slightly less than 3% of health insurers. Borrowing in the P/C segment more than doubled to $11.2 billion in 2020 as a result of COVID-19 but has steadily declined and totaled $6.0 billion in 2022. Despite the uptick in industry borrowing, capacity remains available for most insurers across all segments.

“Borrowing grew in 2022 for life/annuity insurers as they sought to increase investment yields by capitalizing on the higher interest-rate environment,” said Kaitlin Piasecki, industry analyst, AM Best. “As for property/casualty insurers, their FHLB borrowing declined last year after peaking in 2020, when they sought extra liquidity as a cushion against the uncertainty brought on by the COVID-19 pandemic.”

The FHLB is composed of 11 regional cooperatives and are privately owned by their members. To gain membership, an insurer must actively participate in mortgage financing, be financially sound, and purchase FHLB capital stock. As members of the FHLB, insurers can apply for secured loans, known as advances, at lower rates. Historically, each insurance segment has had different reasons for using the FHLB.

“Life insurers use it mostly for spread/yield enhancement, while property/casualty and health insurers use it more for liquidity and short-term working capital/operations,” said Jason Hopper, associate director, AM Best.

AM Best estimates that 2022 new money bond portfolio yields were 5.1% for L/A insurers, a noteworthy bump from 3.6% in 2021. Insurers can borrow from the FHLB at more favorable rates than from commercial lenders, and re-invest that money into higher yielding assets, resulting in additional yield and excess spread over the cost of an FHLB advance.

To access the full copy of the report titled, “FHLB Life/Annuity Members Capitalize on High Rates for Spread Opportunities,” please visit

To view a recent video discussion of AM Best’s report on the FHLB program, please go to

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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