Executive Summary
Funding agreement-backed notes (“FABN”) have long been the dominant institutional spread-funding structure for life insurers, providing public-market access through established note programs. The market, however, is increasingly moving beyond FABN alone as insurers evaluate funding agreement-backed loans (“FABL”) and funding agreement-backed repurchase agreements (“FABR”) as complementary or alternative funding channels.
The rise of FABR and FABL (collectively, “FAB Alternatives”) reflects a practical reassessment of execution flexibility, implementation burden, collateral capacity, and strategic fit. FABN remains effective for large insurers seeking recurring benchmark issuance and broad investor distribution, but it can require meaningful upfront investment in ratings, documentation, service providers, investor relations, and ongoing issuance discipline.
FABR may be the most strategically important alternative for many small and mid-sized life insurers because it can provide institutional funding through privately negotiated collateralized transactions without requiring a full public note program. For insurers with sufficient eligible collateral, FABR can create a scalable institutional channel that may not have been practical historically.
FABL also plays an important role for insurers seeking relationship-driven, bank-based funding without FABR’s collateral-management requirements. Both FABR and FABL can be structured bilaterally or with a small group of counterparties, allowing greater customization around timing, size, maturity, amortization, documentation, and funding mechanics than is typically available in public FABN issuance.
The strategic benefits of FAB Alternatives extend beyond funding access. For companies concentrated in retail annuities or other narrow product lines, a prudently managed institutional spread business may support enterprise diversification and, where appropriately sized and risk-managed, strengthen the insurer’s overall strategic profile.
The key conclusion is that the institutional funding market is moving toward a broader set of options. FABN will remain central for established, large-scale issuers, while FAB Alternatives expand the range of practical funding structures available to insurers.
For the full analysis, including a more detailed comparison of FABN, FABR, and FABL, please see the complete paper here:
Beyond FABN: The Rise of FAB Alternatives
Executive Summary
Funding agreement-backed notes (“FABN”) have long been the dominant institutional spread-funding structure for life insurers, providing public-market access through established note programs. The market, however, is increasingly moving beyond FABN alone as insurers evaluate funding agreement-backed loans (“FABL”) and funding agreement-backed repurchase agreements (“FABR”) as complementary or alternative funding channels.
The rise of FABR and FABL (collectively, “FAB Alternatives”) reflects a practical reassessment of execution flexibility, implementation burden, collateral capacity, and strategic fit. FABN remains effective for large insurers seeking recurring benchmark issuance and broad investor distribution, but it can require meaningful upfront investment in ratings, documentation, service providers, investor relations, and ongoing issuance discipline.
FABR may be the most strategically important alternative for many small and mid-sized life insurers because it can provide institutional funding through privately negotiated collateralized transactions without requiring a full public note program. For insurers with sufficient eligible collateral, FABR can create a scalable institutional channel that may not have been practical historically.
FABL also plays an important role for insurers seeking relationship-driven, bank-based funding without FABR’s collateral-management requirements. Both FABR and FABL can be structured bilaterally or with a small group of counterparties, allowing greater customization around timing, size, maturity, amortization, documentation, and funding mechanics than is typically available in public FABN issuance.
The strategic benefits of FAB Alternatives extend beyond funding access. For companies concentrated in retail annuities or other narrow product lines, a prudently managed institutional spread business may support enterprise diversification and, where appropriately sized and risk-managed, strengthen the insurer’s overall strategic profile.
The key conclusion is that the institutional funding market is moving toward a broader set of options. FABN will remain central for established, large-scale issuers, while FAB Alternatives expand the range of practical funding structures available to insurers.
For the full analysis, including a more detailed comparison of FABN, FABR, and FABL, please see the complete paper here: