Funding Agreement-Backed Note Issuance Program

Assuming that ABC Co. or the SPV an N.Y. Ins. Law Section 3222 (b) (v) a licensed insurer may provide the financing agreement to both. The department will not look beyond this transaction to focus on the role or activities of ABC Co. or SPV in selling securities to institutional buyers. What are securities guaranteed by a financing contract? A financing contract is a deposit contract sold by life insurance companies, which generally pays a guaranteed rate of return over a specified period of time. As the name suggests, these insurance contracts are similar to deposits because they do not contain mortality or morbidity quotas. Insurers make money by issuing these contracts and investing the product in relatively more profitable assets. Financing agreements have long been allocated directly to municipalities and institutional investors, but in recent years insurance companies have begun to create securitization companies (SPEs) to establish financing agreements and issue financing agreements on guaranteed securities (FABS). Based on a super senior debt on the insurer`s balance sheet, FABS attracts a number of potential investors and allows insurers to borrow at a lower cost than other debt securities.18 The movement of life insurers to FHLB is in line with a wider transfer of financing from the parallel bank to the FHLB system. See Acharya, Afonso and Kovner (2013).

Return to Text If an unauthorized insurer issues a financing contract for delivery outside New York State to ABC Co., a subsidiary of ABC Co. or the SPV, the insurer must comply with the laws of its state of residence. The New York Insurance Law is not involved in these circumstances and, assuming all applicable laws are complied with, the Department will not look beyond the initial transaction at the role of ABC Co. or its subsidiary or SPV in the sale of the securities. In the case of an analysis of the securitization of a financing contract or a guaranteed investment contract, the following factors are relevant to determining the applicability of the New York Insurance Act. First, purchasers of the securities issued by the SPV must not have a contractual practice with the insurance company that issues the financing contract. Second, there must be no guarantee from the insurer or any other entity, i.e. the VPS must be the sole source of payment for the securities. Finally, VPS securities should not be presented to potential investors as a kind of insurance contract or product. Staff calculations are based on data from Bloomberg Finance LP and Moody`s ABCP Program Index. Data on securities covered by the financing agreement are available from August 1997.

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