Changes to exclude captives from FHFA membership

A rule proposed by the Federal Housing Finance Agency (FHFA) that would revise the requirements for financial institutions to apply for and retain membership in one of the 12 Federal Home Loan Banks could exclude captives entirely.

The rule is aimed at ensuring that members maintain a commitment to housing finance and that only eligible entities can gain access to bank advances and the benefits of membership.

The biggest proposed change is the redefinition of the term ‘insurance company’ to mean a company that has, as its primary business, the underwriting of insurance for non-affiliated persons.

This would continue to include traditional insurance companies but would effectively exclude captive insurers from membership and prevent entities not eligible for membership from gaining access to bank advances through a captive insurer.

Captive insurers that are already members would be phased out over five years.

The changes would also seek to clarify the standards by which an insurance company’s ‘principal place of business’ is to be identified in determining the appropriate bank district for membership.