2025 Increase in FHLB Borrowings by Life and Annuity Insurers

A report from AM Best highlights that borrowing by U.S. life and annuity insurers from the Federal Home Loan Banks (FHLBs) continued to grow in 2025, though at a slower pace, with a 10% year-over-year increase. This uptick in borrowing was largely driven by funding agreements, emphasizing the ongoing financial strategies within the sector.

The FHLB system, consisting of 11 regionally based government-sponsored banks, provides essential liquidity to financial institutions. This setup supports community and housing endeavors, particularly benefiting insurers involved in mortgage lending who meet certain regulatory compliance requirements. Furthermore, insurers can access these services upon acquiring FHLB stock and posting necessary collateral to qualify for advances.

According to the report “Funding Agreements Drive FHLB Borrowings for the L/A Industry in 2025,” total borrowing via funding agreements rose to $153 billion from $136 billion the previous year. Annuity writers leveraged these loans for lower borrowing costs, enhancing their investment margins. However, insurers must remain vigilant against potential risks associated with credit, collateral management, and market fluctuations.

The report also notes borrowing capacity in 2025 expanded by 18%, primarily influenced by annuity writers, despite being slightly more restricted compared to pre-2019 levels. Jason Hopper, Associate Director of Industry Research and Analytics, commented on the increased borrowing capacity yet noted two-thirds of companies utilized less than half of it, a rise from previous years. Moreover, the number of insurers with outstanding borrowings exceeded those in 2019, demonstrating evolving financial dynamics in the life and annuity sector.

For those seeking comprehensive insights, AM Best offers the full special report for purchase.