In 2025, U.S. insurance companies demonstrated a notable increase in their utilization of the Federal Home Loan Bank (FHLB) system, achieving a new peak in their borrowings. This growth trend has been particularly strong, with double-digit increases observed for the second year running and for the third time within a four-year span. A significant factor contributing to this expansion is the remarkable 18.3% rise in the U.S. life insurance industry's deposit-type contract balances, a growth rate not seen in at least 24 years. This surge underscores the industry's deepening reliance on FHLB for funding, especially for lucrative spread investing opportunities. Furthermore, the property and casualty sector, despite its growing participation, still possesses substantial untapped borrowing capacity, signaling potential for continued growth and liquidity management through FHLB.

Insurers Bolster Financial Footing with Record FHLB Advances in 2025

In 2025, a significant financial shift unfolded within the U.S. insurance sector, as companies substantially increased their engagement with the Federal Home Loan Bank (FHLB) system. By December 31, 2025, advances to U.S. insurance companies had climbed by an impressive 10.4%, reaching an all-time high of $177.85 billion. This marked a continuation of robust growth, representing the second consecutive year and the third time in four years that these advances saw double-digit expansion, according to data from the FHLBanks Office of Finance.

A primary driver of this surge was the U.S. life insurance industry. In 2025, its deposit-type contract balance, prior to reinsurance adjustments, experienced an extraordinary 18.3% increase, after accounting for surrenders and withdrawals. This rapid rate of expansion is particularly noteworthy, being the largest recorded in at least the past 24 years, highlighting a strategic intensification of spread investing activities by life insurers.

Despite these substantial increases, the insurance industry, particularly the property and casualty (P&C) sector, retains considerable capacity for additional borrowing. This indicates a robust financial position and a readiness to further leverage FHLB resources for capital management and investment strategies. The sustained growth in FHLB advances reflects insurers' evolving financial strategies in a dynamic market environment.

The increasing reliance of U.S. insurance companies on FHLB advances, particularly the record-breaking growth observed in 2025, offers crucial insights into the evolving financial landscape of the insurance industry. This trend suggests a strategic pivot towards leveraging government-sponsored entities for enhanced liquidity and capital efficiency, especially in an environment conducive to spread investing. The significant, decades-high expansion in deposit-type contracts within the life insurance sector underscores a proactive approach to managing liabilities and optimizing returns. This development challenges traditional perceptions of insurance company funding, highlighting a sophisticated adaptation to market opportunities. For observers and participants in the financial markets, it signals a need to closely monitor the interplay between regulatory frameworks, financial innovation, and systemic risk, as such large-scale capital movements can have broad implications for financial stability and economic performance.