AM Best: Insurers May Increasingly Look to Tap Federal Home Loan Bank (AM BestTV)

OLDWICK, N.J.--()--In this episode of AMBestTV, Jason Hopper, associate director, research and analytics, AM Best Rating Services, said insurers may turn to loans from the Federal Home Loan Bank (FHLB) to bolster liquidity as the COVID-19-led economic turmoil grows. Click on http://www.ambest.com/v.asp?v=fhlb520 to view the entire program.

Hopper highlighted what are some of the dynamics behind borrowing from FHLB, and how widespread is FHLB access.

“Not just anyone is able to borrow from FHLB,” said Hopper. “Companies must own capital stock to be able to access borrowing funds. Capacity is determined by a mix of collateral and assets. … FHLB access is not substantially widespread throughout the industry, as only 22% of life insurers, 6% of property/casualty insurers and 3% of health insurers actually have access to FHLB borrowing.”

Hopper added that each segment traditionally has accessed FHLB funds for different reasons, and explained how those strategies have started to shift.

“Historically, life insurers have been using FHLB borrowings as more of a spread play, where they borrow funds at a relatively low rate, invest those funds at higher rates and make money off that spread. However, in the more recent borrowings, life insurers have been using it more for liquidity trades, similar to what the property/casualty and the health companies have done.”

To access the related Best’s Special Report, titled, “Potential Rise in Demand for FHLB Borrowing Capacity,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296354.

Recent AMBestTV coverage includes:

  • Car Insurers Return $10.5 Billion to Policyholders: Car insurers are returning $10.5 billion to policyholders through rebates and premium credits to reflect fewer claims and miles driven during the COVID-19 quarantine: http://www.ambest.com/v.asp?v=premiumrembursements420.
  • AAM: Pandemic Pressures Insurers’ Investment Portfolios: Equity market uncertainty is creating challenges for life and property/casualty insurers, said Elizabeth Henderson, a principal and director of corporate credit at Asset Allocation & Management Co.: http://www.ambest.com/v.asp?v=henderson420.

AM BestTV covers exclusive AM Best and insurance industry information and reports, targeted topics and key developments in the insurance, reinsurance and related sectors daily. Sign up for alerts of episodes at www.ambest.com/multimedia/ambtvsignup.html. View AM BestTV episodes at www.ambest.tv.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com

Contacts

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com