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Life Health > Life Insurance

FHFA to Insurers: Scram

By Arthur D. Postal

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WASHINGTON BUREAU — Insurers are trying to keep the Federal Housing Finance Agency from shutting a lending window on their fingers.

The Federal Housing Finance Agency (FHFA) – the agency that now oversees the Federal Home Loan Banks – is considering a proposal to eliminate or reduce insurer access to the system’s liquidity resources.

The FHFA asked in December 2010 whether insurer members of the system should be subject to a requirement that at least 10% of their assets be in residential mortgage loans or whether some alternative residential mortgage investment requirement should be applied to insurers.

The FHFA has received a total of about 65 comments on the proposal in all, with most coming from banking groups.

Five large insurance industry trade groups -the American Council of Life Insurers, Washington; the American Insurance Association, Washington; the Financial Services Roundtable, Washington; the National Association of Mutual Insurance Companies, Indianapolis; and the Property Casualty Insurers Association of America, Des Plaines, Ill. — have written a joint comment letter opposing the proposal.

Several other insurers and reinsurers also have written to express concerns about the proposal.

The insurance trade groups report in the joint letter that about 220 insurers are members of Federal Home Loan Banks (FHLBanks). Insurance company members account for 10% of the banks’ outstanding combined advances and about 8% of the banks’ capital stock as of Sept. 30, 2010, the groups say.

The FHFA decision to shut insurers out of access to lending window facilities could affect many of the groups’ members, the groups say.

The proposed restrictions “could impede the fragile housing market’s recovery,” and “could also limit funding options for insurance companies, and in turn may limit the ability of FHLBank insurance company members to further provide needed liquidity to mortgage and housing-related assets,” the insurance groups say.

The Obama administration and Congress are currently conducting a comprehensive review of the housing finance system in the United States, which will include an examination of the FHLBanks’ role in providing liquidity to the financial system, the groups say.

“For these reasons,” the groups say, “we urge that the FHFA table or delay this [proposal to draft regulations], at least until congressional action.”

Other Federal Home Loan Bank coverage from National Underwriter Life & Health:

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