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AB 1781

Federal Home Loan Banks.

2025-2026 Regular Session Introduced by Michelle Rodriguez

The bill protects FHLBs and their collateral from stays or voided transfers during insurer insolvencies, preserving rights against collateral tied to FHLB security agreements.

In Assembly. Ordered to Engrossing and Enrolling.
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WeVote Research Nonpartisan
Bill Summary · AB 1781

Summary of AB 1781 (2025-2026) – Federal Home Loan Banks

Note: This summary focuses on the substantive provisions and practical impact of the bill as introduced in February 2026.

1) Purpose and intent

  • The bill amends the California Insurance Code to address the interaction between California insurer-members of Federal Home Loan Banks (FHLBs) and insolvency or delinquency proceedings.
  • Its core aim is to protect FHLBs (and collateral, security, guarantees) from stay, injunction, or veto actions in relation to rights against collateral or transfers tied to FHLB security agreements with insurer-members.
  • It also clarifies and expands protections for FHLBs and their collateral in the context of insurer insolvencies, rehabilitation, conservation, or liquidation.

2) Key provisions and changes

A. Definition and scope

  • Defines “Federal Home Loan Bank” and “insurer-member” for purposes of this act.
  • Adds a new Section 1036.5 to the Insurance Code detailing protections for FHLBs and their collateral.

B. Protections for Federal Home Loan Banks and collateral (new Section 1036.5)

  • An FHLB shall not be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action against collateral pledged by an insurer-member or FHLB-insurer-member under any FHLB security agreement (and related security/collateral arrangements).
  • A receiver, rehabilitator, liquidator, or conservator may not void transfers or obligations arising under an FHLB security agreement with an insurer-member, unless there is actual intent to hinder, delay, or defraud creditors.

C. Insolvency provisions and “covered claims” context

  • The bill aligns with the existing framework governing insolvencies of insurers but adds FHLB protections for collateral and related transfers.
  • It sets out various definitions and criteria for what counts as “covered claims” (in the broader context of California insurance guarantee associations), with extensive cross-references to how these claims are treated in insolvencies.

D. Amendments to related Insurance Code sections

  • 1010: Recitals and definitions related to insurers and Federal Home Loan Banks (no broad change to substance beyond consistent definitions).
  • 1063.1: Revisions to the meaning of “covered claims,” “insurer,” and related terms to reflect FHLB considerations.
  • 1063.6: Stay provisions remain, but with explicit protection for FHLBs against stays or injunctions with respect to collateral.
  • 1064.1, 1064.9: Administrative and procedural provisions for delinquency and protection of collateral, now including FHLB-related protections.
  • 1067.04 and 1067.16: Administrative and assessment provisions related to guarantee associations, with enhancements to accommodate FHLB-insurer claims and protections.

E. Transfer and avoidance rules

  • Prohibits voiding transfers or obligations arising under FHLB security or related credit arrangements, unless the transfer was made with actual intent to hinder, delay, or defraud creditors.

3) Who/what is affected

  • Insurer-members of Federal Home Loan Banks operating in California, and their confidential collateral, security agreements, pledges, guarantees, or related credit enhancements.
  • California insurance regulators and the California Life and Health Insurance Guarantee Association (CIGA) framework, insofar as it interacts with FHLB collateral during insolvency or delinquency proceedings.
  • Federal Home Loan Banks that operate with California insurer-members.

4) Procedural and timeline aspects

  • The bill was introduced February 9, 2026, during the 2025-2026 California legislative session.
  • It adds new statutory protections that would apply in insolvency, rehabilitation, or liquidation contexts, and work alongside existing stay provisions for insured entities.
  • There is no new appropriation required (as per the bill’s digest indicating “Appropriation: No” and “Fiscal Committee: No”).

5) Practical implications

  • For FHLBs and insurer-members, the bill reduces risk that collateral or security arrangements could be unwound or restrained by California insolvency proceedings.
  • For creditors and claimants, the protections may streamline enforcement of rights to collateral pledged to FHLBs, potentially affecting the timing and method of recoveries in insolvencies.
  • The changes emphasize the priority of FHLB-related obligations and collateral during insolvency proceedings, aligning California law more closely with the interests of secured lenders under FHLB arrangements.

If you’d like, I can compare AB 1781’s provisions to current law in California’s Insurance Code or provide a plain-language brief for non-legal audiences.

Compiled from official sources — confirm details with the bill’s official record.

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