In a typical FABS structure, a life insurer sells a single financing contract to an EPS that funds the financing agreement by distributing smaller FABS parts to institutional investors. In addition, at least two types of FABS are designed for short-term investors, such as leading money market investment funds: Extendible Funding Agreement-backed Notes (XFABN) and Funding Agreement-backed commercial paper (FABCP). These securities have a much shorter term than the underlying financing agreement, which typically has a term of about ten years. XFABN often has an initial duration of 397 days, but each month gives investors the option to gradually extend the duration of their bonds by one month. Fabcp is a fixed-term contract from one week to six months.3 8. 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 the text The obligations of payment of VPPs under the securities are guaranteed or guaranteed by the financing agreements and all other assets of the SPV (including all rights under a swap agreement). Securities may be denominated in U.S.
dollars or other currencies and are issued in unit values below the face value of one of the VPS financing agreements. Securities have fixed or variable interest coupons or are issued without coupons and may provide for an interest payment or periodic amortization of an initial discount. Daily amount of outstanding securities covered by maturity financing contract: PDF Accessible Version The data presented in this EFA project contain additional details on the securities covered by a financing contract (FABS). FABS are securities covered by a financing contract that is a deposit contract issued by life insurance companies, which promises a predictable fixed payment flow over a period of time. As described in Holmquist and Perozek (2016), the U.S. financial accounts report the total amount of FABS`s outstanding assets at a quarterly rate. This EFA project expands financial account data by providing daily data to different types of FABS, which vary depending on duration and integrated optionality. In particular, the EFA provides daily data on the three main types of FABS problems: FABN with fixed maturities greater than 397 days, FABN with fixed maturities of 397 days or less and FABN with built-in selling options such as XFABN. In addition, the EFA provides quarterly data on the FABCP.
The more detailed data presented as part of the EFA project helps to give a clearer picture of the evolution of this important financing market. 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. FABCP`s daily estimates are for the end of the previous quarter. 2. When securities are offered to or purchased by investors in New York, neither VPS nor insurers are considered financing contracts or insurance or retirement contracts, nor associated with the insurance business in New York as a result of such an offer or sale of securities; The funding agreement is not defined in the Insurance Act. However, in the past, the Department has considered an unassigned guaranteed investment contract as a financing agreement, which does not provide for annuity purchases by or on behalf of plan participants.