Sec. 3. Captive insurance company eligibility for membership
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Section 4(a) of the Federal Home Loan Bank Act ( 12 U.S.C. 1424(a) ) is amended by adding at the end the following: A captive insurance company shall be eligible to become a member of a Federal Home Loan Bank only if the parent company of the captive insurance company meets the following requirements: At least 51 percent of the total assets of the parent company are invested in residential mortgage loans. At least 60 percent of the total assets of the parent company are held in real estate assets, cash and cash equivalents, and government securities (as such terms are used under section 856(c)(4)(A) of the Internal Revenue Code of 1986).
Such capital standards as the Director determines appropriate, by rule, which shall be as close as practicable to those capital standards applicable to insured depository institutions (as defined under section 3 of the Federal Deposit Insurance Act). Every 5 years after becoming a member of a Federal Home Loan Bank, a captive insurance company shall submit a report, prepared by a third-party auditor, to the Director containing information on compliance by the parent company with the requirements described under subparagraph (A).
A parent company of a captive insurance company that is a member of a Federal Home Loan Bank shall— maintain the mission alignment standards described under subparagraph (A)(i); maintain the capital standards described under subparagraph (A)(ii); be deemed a regulated entity under section 1314 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4514 ); and be subject to such additional reporting requirements as the Director determines appropriate, by rule.
If the Director determines that a parent company no longer meets the mission alignment standards described under subparagraph (A)(i), the Director shall require the parent company to file quarterly reports with the Director for a 1-year period, showing how the parent company is seeking to comply with such mission alignment standards. Each captive insurance company that is a member of a Federal Home Loan Bank shall issue a quarterly report to the Bank containing information on the compliance, by the parent company of the captive insurance company, with the capital standards described under subparagraph (A)(ii).
If a Federal Home Loan Bank receiving reports described under subclause
(I)determines that a parent company has failed to meet the capital standards described under subparagraph (A)(ii) for 2 consecutive quarters, the Bank shall notify the Director of such failure. If the Director determines that a parent company no longer meets the capital standards described under subparagraph (A)(ii), the Director shall require the parent company to file a capital restoration plan with the Director and the Federal Home Loan Bank with respect to which the parent company’s captive insurance company is a member. A captive insurance company’s membership of a Federal Home Loan Bank shall be terminated, in accordance with section 6(d)(2) of the Federal Home Loan Bank Act ( 12 U.S.C. 1426(d)(2) ), if— the parent company of the captive insurance company does not submit a capital restoration plan required under clause
(v)that is substantially in compliance with section 1369C of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4622 ) within the applicable period; the Director does not approve such a capital restoration plan required under clause (v); the Director determines that the parent company has failed to comply with such a capital restoration plan; or with respect to a parent company that the Director has determined no longer meets the mission alignment standards described under subparagraph (A)(i), the parent company has not returned to compliance with such standards before the end of the 1-year period described under clause (iii). A captive insurance company whose membership in a Federal Home Loan Bank is terminated under clause
(vi)may not reapply for membership in a Federal Home Loan Bank until the end of the 5-year period beginning on the date of such termination. The Director shall require the parent company of the captive insurance company, in the event that the captive insurance company defaults on any amounts owed to a Federal Home Loan Bank, to pay the Bank the amount of any such default. For purposes of enforcing this subparagraph, a parent company shall be deemed a regulated entity under sections 1371, 1372, and 1376 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4631 , 4632, and 4636). Any security interest granted to a Federal Home Loan Bank by any captive insurance company, or by its parent company or any affiliate company on its behalf, shall be entitled to priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor) other than claims and rights that— would be entitled to priority under otherwise applicable law; and are held by actual bona fide purchasers for value or by actual secured parties that are secured by actual perfected security interests. . Not later than the end of the 1-year period beginning on the date of enactment of this Act, the Director of the Federal Housing Finance Agency shall issue the capital standards and reporting requirements rules described under subparagraphs (A)(ii) and (B)(ii)(IV) of section 4(a)(6) of the Federal Home Loan Bank Act. Section 4(a)(6) of the Federal Home Loan Bank Act, as added by subsection (a), shall take effect with respect to a captive insurance company on the effective date of the rules required under subsection (b). A captive insurance company that has, or will have, the company’s membership in a Federal Home Loan Bank terminated due solely to the change in the treatment of captive insurance companies under the final rule of the Federal Housing Finance Agency titled Members of Federal Home Loan Banks (81 Fed. Reg. 3246; published January 20, 2016) may continue membership or have membership restored, as applicable, in the same Federal Home Loan Bank during the period beginning on the date of enactment of this Act and ending on the day the Director issues the rules required under subsection (b), if— the Federal Home Loan Bank determines, including based on information submitted by the captive insurance company, that— the affiliate insured by the captive insurance company makes, owns, or acquires residential mortgage loans; and the captive insurance company will comply with the membership eligibility requirements described in paragraphs (a), (b), and
(c)of section 1263.6 of title 12, Code of Federal Regulations, during such period; and the captive insurance company continues to be owned, or upon restoration of membership is owned and continues to be owned, including direct ownership by a controlling entity or indirect ownership through one or more holding companies, by the same entity that owned the captive insurance company on the date of enactment of this subsection.
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- 81 FR 3246
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Sec. 3
Captive insurance company eligibility for membership
Fed. Reg.81 FR 3246
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