FHLB ties to SVB and Signature Bank – What is the impact to insurers who borrow?

The Federal Home Loan Bank (FHLB), originally established to support mortgage finances, is today also a source of lending and/or liquidity for many insurers. In the wake of the recent regional banking turmoil, the 11 government-backed home-loan banks have come under scrutiny as SVB and Signature Bank borrowed billions from FHLB to plug shortfalls before collapsing.

What are the implications of this for FHLB and insurance companies? 

  1. The FHLB may face a more detailed scrutiny of their lending practices, membership requirements, and mission. Critics argue that the home-loan banks have ventured too far from their original scope on housing and question the support of financially unstable banks.
  2. Insurance companies who lean on advances, funding agreements, and borrowings at low interest rates from FHLB may be impacted by any changes to lending practices or requirements.

Corporate liquidity has been a huge concern leading into 2023. The liquidity and funding offered by FHLB is particularly important for the US insurance industry. FHLB provides a source of contingent, low-cost, and flexible liquidity during uncertain markets. As such, it acts as reassurance even if the insurer does not foresee future emergency liquidity needs.

  • An increasing number of insurers (particularly mutual insurers who can be limited in funding alternatives) rely on FHLB borrowings and access to funding for business plans. 1
  • As of December 31, non-captive US insurers made advances, funding agreements, and borrowings from the FHLB of $137.1B, over 20 billion up from December 31 of 2021. 2
  • FHLB insurance company membership increased from 542 to 565 between December 31, 2021, and December 31 2022. 3
  • The percentage of FHLB borrowings by insurers has tripled from 2007 to 2022. 4

As you may recall, we have been working closely with a number of the FHL Banks for several years now as our insurance-clients became members and borrowers.  Still too early to fully understand how this banking crisis will impact insurers’ ability to use the FHLB for liquidity.  We plan to keep a close eye on how things unfold.

1 Tim Zawacki. (2021). Insurers’ FHLB borrowings face headwinds in 2021 after reaching new record. S&P Global Market Intelligence. 
2 Tim Zawacki. (2023). Insurers, banks benefit from FHLB membership in stressful times. S&P Capital IQ.
3 Tim Zawacki. (2023). Insurers, banks benefit from FHLB membership in stressful times. S&P Capital IQ.


This material is prepared for designated institutional and professional investors and their consultants or for such other use as may be authorized by Wellington Management. This material and/or its contents are current at the time of writing. Wellington assumes no duty to update any information in this material in the event that such information changes. While any third-party data used is considered reliable, its accuracy is not guaranteed. Forward-looking statements should not be considered as guarantees or predictions of future events. Past results are not a reliable indicator or future results. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. This content may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. All investing involves risk. Investment markets are subject to economic, regulatory, market sentiment and political risks. All investors should consider the risks that may impact their capital, before investing. The value of your investment may become worth more or less than at the time of the original investment.

Wellington Management
Wellington Management

Insurers have been building investment partnerships with Wellington since 1975. Our goals since then have remained evergreen – to exceed the investment objectives and service expectations of our clients. As an integral part of Wellington’s global investment platform, our dedicated Financial Reserves team offers a breadth and depth of resources and experience to serve our insurance clients as a go-to thought partner, risk manager, and trusted advisor for complex investment challenges. Today’s unprecedented challenges require unconventional solutions, and our collaborative strategic and proactive risk management approach helps our clients to be well-prepared.

Rich Coffman
+1 617 951 5311

Sarah Marschok
+1 617 790 7170


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