The FHLB Assist: Helping Insurers Liquidity Options to Boost Balance-Sheet Strength and Financial Stability
June 26, 2025
By John Rup, Director, lnsurance Solutions
In today’s volatile financial landscape, insurers are quietly getting creative. With interest rates in a higher-for-longer regime, credit spreads tightening, and liquidity under pressure, many are looking beyond the traditional playbook. Capital markets may not always be open when needed, and utilizing alternative liquidity sources can be costly when navigating unstable conditions.
Enter the Federal Home Loan Bank (FHLB) system – a nearly century-old network of regional banks whose mission is to provide liquidity to their members to support housing finance and community development through all economic cycles. FHLB membership may be a valuable benefit for insurers as its borrowing programs may help enhance profitability, balance-sheet strength and financial stability. FHLB membership is growing among larger insurers and Conning believes it merits further consideration from mid-size companies as well.
The FHLB system was founded in 1932 in response to the Great Depression to support homeownership and distressed lenders. Insurers can also use the FHLB system and its competitive borrowing rates for emergency short-term liquidity backstops, funding for working capital or strategic investments (including mergers and acquisitions), aid in asset-liability management, or pursuing additional net investment income through spread-investing programs.
A growing number of insurance companies are looking to take advantage of FHLB programs, as witnessed by the increasing membership rate and borrowing activities (see Figure 1). At year-end 2024, 596 insurance companies were FHLB members, up from 579 in 2023; outstanding loans, or “advances,” to insurers rose to $161 billion from $143 billion, despite roughly the same number of insurers borrowing.
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