This special report is an update of the NAIC Capital Markets Bureau Special Report, "U.S. Insurer Exposure to the Federal Home Loan Banking System as of Year-End 2015," published Sept. 13, 2016. The previously published report discussed the purpose and structure of the Federal Home Loan Bank (FHLB) system, and it concluded with an analysis of U.S. insurer exposure to FHLB borrowings (advances), debt and capital stock.
For any insurer to borrow from an FHLB, they must be a member of the specific FHLB, which requires them to hold both member and activity stock. This is regardless of how the borrowing is treated by either the FHLB or the insurer; i.e., as an advance, as debt or as a funding agreement. All such capital stock is treated as common stock by insurers. Given the connection between the two activities, the requirements regarding disclosure of borrowings are included in Statement of Statutory Accounting Principles (SSAP) No. 30—Unaffiliated Common Stock.
According to SSAP No. 30, U.S. insurers shall disclose the aggregate amount of their borrowings from the FHLB, reflecting a compilation of all advances, loans, funding agreements, repurchase agreements, securities lending, etc., that they have outstanding with the FHLB. This disclosure is required for outstanding advances at the reporting date and the maximum amount of aggregate borrowings from an FHLB at any time during the current reporting period.
In this report, our analysis focuses on U.S. insurer exposure to FHLB capital stock and FHLB bonds at year-end 2016, as well as the maximum amount of FHLB borrowings by U.S. insurers throughout 2016.