Return of funding agreements credit negative for life insurers says Moody's


In a search for yield, U.S. life insurers have significantly boosted issuance of Funding Agreement Note Issuance Program debt (FANIPs), says Moody's. Insurers use the FANIPs for funding, tilting the investing of the proceeds - given today's low-rate environment - in things like commercial mortgages, public corporate debt, and private placements.

Popular pre-crisis and stagnant since, "these funding agreement instruments are showing signs of life," says Moody's analyst Rokhaya Cisse. This year through April, issuance is up by about 56% to $8.8B from the same year-ago period. Among the seven insurers which have issued the funding this year are MetLife (MET -1.7%), Principal Financial (PFG -1.4%), and Prudential (PRU -1.6%).

While Moody's doesn't expect issuance to reach pre-crisis levels, the boosted level "is credit negative because they present liquidity and asset-liability management risks that can emerge during capital markets disruptions."

From other sites
Comments (0)
Be the first to comment
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs