Funding Agreements

Secured Funding Agreements (SFAs)

Institutional insurance contracts backed by high-quality
collateral—designed for efficient, policyholder-friendly funding.

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What are Secured Funding Agreements (SFAs)?

A secured funding agreement is a long-term institutional arrangement in which a life insurer issues a funding agreement to a special purpose vehicle (SPV), supported by a dedicated collateral account. This structure allows the insurer to engage with institutional counterparties while preserving policyholder treatment and maintaining clarity around regulatory and liability frameworks.

How Secured Funding Agreements Work

  • Insurers pledge collateral made up of high-quality corporate bonds or structured finance securities (similar to FHLB borrowings).
  • Insurers raise funds by issuing policies with fixed or floating interest rates, usually maturing within 3–5 years.
  • Policyholders are unable to surrender early, eliminating disintermediation risk.
  • Unlike traditional annuity or lending products, insurers retain control over maturity and funding amounts.
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Why SFAs Matter

SFAs allow insurers to raise institutional capital using high-quality assets that fall outside traditional borrowing programs like FHLB. By pledging investment-grade corporates or structured products, they access competitive funding while preserving policyholder treatment.

Though overcollateralization introduces modest capital charges, SFAs typically offer tighter pricing than unsecured alternatives. As institutional markets evolve, they provide a scalable, asset-efficient solution for diversifying funding sources.