I 

116TH CONGRESS 

2D SESSION H. R. 8872 

To amend the Federal Home Loan Bank Act to enable captive insurance 

companies to apply for membership in the Federal Home Loan Bank 

System, to add additional membership criteria for captive insurance 

companies, to require a study on Federal Home Loan Bank membership, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 4, 2020 

Mr. HOLLINGSWORTH (for himself and Mr. HECK) introduced the following 

bill; which was referred to the Committee on Financial Services 

A BILL 

To amend the Federal Home Loan Bank Act to enable 

captive insurance companies to apply for membership 

in the Federal Home Loan Bank System, to add additional membership criteria for captive insurance companies, to require a study on Federal Home Loan Bank 

membership, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Transparency in Fed5 eral Home Loan Bank Membership Act of 2020’’. 


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1 SEC. 2. DEFINITIONS. 

2 Section 2 of the Federal Home Loan Bank Act (12 

3 U.S.C. 1422) is amended by adding at the end the fol4 lowing: 

5 ‘‘(13) CAPTIVE INSURANCE COMPANY.—The 

6 term ‘captive insurance company’ means an insur7 ance company whose primary business is the insur8 ance of its affiliates. 

9 ‘‘(14) INSURANCE COMPANY.—The term‘ insur10 ance company’ means an entity that holds an insur11 ance license or charter under the laws of a State. 

12 ‘‘(15) PARENT COMPANY.—The term ‘parent 

13 company’ means the ultimate parent company.’’. 

14 SEC. 3. CAPTIVE INSURANCE COMPANY ELIGIBILITY FOR 

15 MEMBERSHIP. 

16 (a) IN GENERAL.—Section 4(a) of the Federal Home 

17 Loan Bank Act (12 U.S.C. 1424(a)) is amended by adding 

18 at the end the following: 

19 ‘‘(6) ELIGIBLE CAPTIVE INSURANCE COMPA20 NIES.— 

21 ‘‘(A) IN GENERAL.—A captive insurance 

22 company shall be eligible to become a member 

23 of a Federal Home Loan Bank only if the par24 ent company of the captive insurance company 

25 meets the following requirements: 


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1 ‘‘(i) MISSION ALIGNMENT STAND2 ARDS.— 

3 ‘‘(I) HOUSING INVESTMENT.—At 

4 least 51 percent of the total assets of 

5 the parent company are invested in 

6 residential mortgage loans. 

7 ‘‘(II) FORM OF INVESTMENTS.— 

8 At least 60 percent of the total assets 

9 of the parent company are held in real 

10 estate assets, cash and cash equiva11 lents, and government securities (as 

12 such terms are used under section 

13 856(c)(4)(A) of the Internal Revenue 

14 Code of 1986). 

15 ‘‘(ii) CAPITAL STANDARDS.—Such 

16 capital standards as the Director deter17 mines appropriate, by rule, which shall be 

18 as close as practicable to those capital 

19 standards applicable to insured depository 

20 institutions (as defined under section 3 of 

21 the Federal Deposit Insurance Act). 

22 ‘‘(B) ONGOING MEMBERSHIP.— 

23 ‘‘(i) REPORTING REQUIREMENT.— 

24 Every 5 years after becoming a member of 

25 a Federal Home Loan Bank, a captive inVerDate Sep 11 2014 20:23 Dec 15, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H8872.IH H8872

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1 surance company shall submit a report, 

2 prepared by a third-party auditor, to the 

3 Director containing information on compli4 ance by the parent company with the re5 quirements described under subparagraph 

6 (A). 

7 ‘‘(ii) PARENT COMPANY REQUIRE8 MENTS.—A parent company of a captive 

9 insurance company that is a member of a 

10 Federal Home Loan Bank shall— 

11 ‘‘(I) maintain the mission align12 ment standards described under sub13 paragraph (A)(i); 

14 ‘‘(II) maintain the capital stand15 ards described under subparagraph 

16 (A)(ii); 

17 ‘‘(III) be deemed a ‘regulated en18 tity’ under section 1314 of the Fed19 eral Housing Enterprises Financial 

20 Safety and Soundness Act of 1992 

21 (12 U.S.C. 4514); and 

22 ‘‘(IV) be subject to such addi23 tional reporting requirements as the 

24 Director determines appropriate, by 

25 rule. 


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1 ‘‘(iii) FAILURE TO MEET MISSION

2 ALIGNMENT STANDARDS REQUIREMENT.— 

3 If the Director determines that a parent 

4 company no longer meets the mission 

5 alignment standards described under sub6 paragraph (A)(i), the Director shall require 

7 the parent company to file quarterly re8 ports with the Director for a 1-year period, 

9 showing how the parent company is seek10 ing to comply with such mission alignment 

11 standards. 

12 ‘‘(iv) REPORT ON PARENT COMPANY

13 COMPLIANCE WITH CAPITAL STANDARDS.— 

14 ‘‘(I) IN GENERAL.—Each captive 

15 insurance company that is a member 

16 of a Federal Home Loan Bank shall 

17 issue a quarterly report to the Bank 

18 containing information on the compli19 ance, by the parent company of the 

20 captive insurance company, with the 

21 capital standards described under sub22 paragraph (A)(ii). 

23 ‘‘(II) REPORT ON NON-COMPLI24 ANCE.—If a Federal Home Loan 

25 Bank receiving reports described 


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1 under subclause (I) determines that a 

2 parent company has failed to meet the 

3 capital standards described under sub4 paragraph (A)(ii) for 2 consecutive 

5 quarters, the Bank shall notify the 

6 Director of such failure. 

7 ‘‘(v) FAILURE TO MEET CAPITAL

8 STANDARDS REQUIREMENT.—If the Direc9 tor determines that a parent company no 

10 longer meets the capital standards de11 scribed under subparagraph (A)(ii), the 

12 Director shall require the parent company 

13 to file a capital restoration plan with the 

14 Director and the Federal Home Loan 

15 Bank with respect to which the parent 

16 company’s captive insurance company is a 

17 member. 

18 ‘‘(vi) TERMINATION OF MEMBER19 SHIP.—A captive insurance company’s 

20 membership of a Federal Home Loan 

21 Bank shall be terminated, in accordance 

22 with section 6(d)(2) of the Federal Home 

23 Loan Bank Act (12 U.S.C. 1426(d)(2)), 

24 if— 


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1 ‘‘(I) the parent company of the 

2 captive insurance company does not 

3 submit a capital restoration plan re4 quired under clause (v) that is sub5 stantially in compliance with section 

6 1369C of the Federal Housing Enter7 prises Financial Safety and Sound8 ness Act of 1992 (12 U.S.C. 4622) 

9 within the applicable period; 

10 ‘‘(II) the Director does not ap11 prove such a capital restoration plan 

12 required under clause (v); 

13 ‘‘(III) the Director determines 

14 that the parent company has failed to 

15 comply with such a capital restoration 

16 plan; or 

17 ‘‘(IV) with respect to a parent 

18 company that the Director has deter19 mined no longer meets the mission 

20 alignment standards described under 

21 subparagraph (A)(i), the parent com22 pany has not returned to compliance 

23 with such standards before the end of 

24 the 1-year period described under 

25 clause (iii). 


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1 ‘‘(vii) REAPPLICATION.—A captive in2 surance company whose membership in a 

3 Federal Home Loan Bank is terminated 

4 under clause (vi) may not reapply for 

5 membership in a Federal Home Loan 

6 Bank until the end of the 5-year period be7 ginning on the date of such termination. 

8 ‘‘(C) PARENT COMPANY SUPPORT.— 

9 ‘‘(i) IN GENERAL.—The Director shall 

10 require the parent company of the captive 

11 insurance company, in the event that the 

12 captive insurance company defaults on any 

13 amounts owed to a Federal Home Loan 

14 Bank, to pay the Bank the amount of any 

15 such default. 

16 ‘‘(ii) ENFORCEMENT POWERS.—For 

17 purposes of enforcing this subparagraph, a 

18 parent company shall be deemed a regu19 lated entity under sections 1371, 1372, 

20 and 1376 of the Federal Housing Enter21 prises Financial Safety and Soundness Act 

22 of 1992 (12 U.S.C. 4631, 4632, and 

23 4636). 

24 ‘‘(D) CLARIFICATION OF PRIORITY OF SE25 CURED INTERESTS.—Any security interest 


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1 granted to a Federal Home Loan Bank by any 

2 captive insurance company, or by its parent 

3 company or any affiliate company on its behalf, 

4 shall be entitled to priority over the claims and 

5 rights of any party (including any receiver, con6 servator, trustee, or similar party having rights 

7 of a lien creditor) other than claims and rights 

8 that— 

9 ‘‘(i) would be entitled to priority 

10 under otherwise applicable law; and 

11 ‘‘(ii) are held by actual bona fide pur12 chasers for value or by actual secured par13 ties that are secured by actual perfected 

14 security interests.’’. 

15 (b) RULEMAKING.—Not later than the end of the 1- 

16 year period beginning on the date of enactment of this 

17 Act, the Director of the Federal Housing Finance Agency 

18 shall issue the capital standards and reporting require19 ments rules described under subparagraphs (A)(ii) and 

20 (B)(ii)(IV) of section 4(a)(6) of the Federal Home Loan 

21 Bank Act. 

22 (c) APPLICABILITY.—Section 4(a)(6) of the Federal 

23 Home Loan Bank Act, as added by subsection (a), shall 

24 take effect with respect to a captive insurance company 


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1 on the effective date of the rules required under subsection 

2 (b). 

3 (d) CAPTIVE INSURANCE COMPANY ELIGIBILITY

4 TRANSITION PERIOD.—A captive insurance company that 

5 has, or will have, the company’s membership in a Federal 

6 Home Loan Bank terminated due solely to the change in 

7 the treatment of captive insurance companies under the 

8 final rule of the Federal Housing Finance Agency titled 

9 ‘‘Members of Federal Home Loan Banks’’ (81 Fed. Reg. 

10 3246; published January 20, 2016) may continue mem11 bership or have membership restored, as applicable, in the 

12 same Federal Home Loan Bank during the period begin13 ning on the date of enactment of this Act and ending on 

14 the day the Director issues the rules required under sub15 section (b), if— 

16 (1) the Federal Home Loan Bank determines, 

17 including based on information submitted by the 

18 captive insurance company, that— 

19 (A) the affiliate insured by the captive in20 surance company makes, owns, or acquires resi21 dential mortgage loans; and 

22 (B) the captive insurance company will 

23 comply with the membership eligibility require24 ments described in paragraphs (a), (b), and (c) 


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1 of section 1263.6 of title 12, Code of Federal 

2 Regulations, during such period; and 

3 (2) the captive insurance company continues to 

4 be owned, or upon restoration of membership is 

5 owned and continues to be owned, including direct 

6 ownership by a controlling entity or indirect owner7 ship through one or more holding companies, by the 

8 same entity that owned the captive insurance com9 pany on the date of enactment of this subsection. 

10 SEC. 4. STUDY ON IMPACT OF EXPANSION OF MEMBER11 SHIP. 

12 (a) STUDY.—The Director of the Federal Housing 

13 Finance Agency shall conduct a study on the impact of 

14 the expansion of the Federal Home Loan Bank System 

15 to additional types of entities involved in the housing fi16 nance system. The study shall consider— 

17 (1) how liquidity provided through the Federal 

18 Home Loan Bank System could be increased in a 

19 manner that is consistent with its mission; 

20 (2) what initial and ongoing capital and report21 ing requirements for membership could be used to 

22 minimize risk to the Federal Home Loan Bank Sys23 tem; 

24 (3) how the Federal Housing Finance Agency 

25 could use its oversight and authority to ensure that 


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1 expanded membership would not pose excessive risk 

2 to the Federal Home Loan Bank System; 

3 (4) mitigants and transaction structures to ad4 dress risk of an insolvency proceeding affecting the 

5 parent of a captive insurance company member; and 

6 (5) other topics relevant to developing a frame7 work for membership that promotes the mission of 

8 the Federal Home Loan Bank System. 

9 (b) REPORT.—Not later than one year after the date 

10 of enactment of this Act, the Director shall submit to the 

11 Committee on Banking, Housing, and Urban Affairs of 

12 the Senate and the Committee on Financial Services of 

13 the House of Representatives a report on the study re14 quired under subsection (a), including all findings and de15 terminations made in carrying out the study. 

Æ 


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