US life insurers see rising risk from FABNs

Written by Adam Cadle

23/10/2025

US life insurers are seeing rising risk from funding agreement-backed notes (FABNs), Fitch Ratings has said.

According to the ratings agency, FABN issuance raises insurers’ investment leverage and credit risk.

“FABNs introduce incremental risk to insurers’ funding and credit profiles compared to traditional insurance liabilities due to their credit sensitivity, rate exposure and commoditised nature. However, modestly sized programs are viewed as a reasonable addition to a life insurer’s liability structure,” it argued.

FABN market activity is expected to remain strong, supported by meaningful upcoming maturities as issuers refinance and manage liability profiles and look to opportunistically increase spread-based income.

Record issuance of FABNs this year has been driven by positive market conditions, expanding issuer participation and increased investor demand. Outstanding FABN volume of $214.5bn as of 30 June 2025 was up from roughly $200bn at year-end 2024.

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