Increase in FHLB Lending to Life/Annuity Insurers in 2025

According to a recent report by AM Best, there was a moderate 10% increase in lending from the Federal Home Loan Banks (FHLBs) to U.S. life/annuity insurers in 2025, driven largely by funding agreements. Despite a slight slowdown, the borrowing landscape remains active with funding agreements rising to $153 billion from $136 billion in 2024. Insurers are leveraging lower borrowing costs to boost investment returns, though this approach introduces potential credit, collateral, and market risks.

Annuity providers played a key role in the 18% increase in borrowing capacity, which remains available but more constrained compared to pre-2019 levels. This trend parallels the increased involvement of private capital in the life/annuity sector. AM Best's associate director, Jason Hopper, notes that in 2025, over two-thirds of insurers used less than half their borrowing capacity—up from 62% in 2019—even as more companies held outstanding borrowings than in that year.

The report underscores growth in deposit-type contracts, such as guaranteed investment contracts (GICs), which benefit from favorable crediting rates. The industry's FHLB funding agreements, under GICs and other deposit funds, have significantly increased over the past two years, sustaining about 22% of the total balance. FHLB borrowers are mainly companies focusing on annuities and spread-play businesses, with investment profiles mirroring those of individual annuity portfolios, particularly in private placements and risk-specific investments.

For a detailed analysis, the complete report is available on AM Best's website. AM Best is a trusted provider of credit ratings, industry news, and data analytics, serving clients in over 100 countries.