Standby LCs for Performance Guarantees
Do you need a letter of credit (LC) from a rated bank to stand behind your guarantee of a customer's lease payments or performance under a construction contract? Does your credit card provider require an LC to guarantee payments on your credit card processing account? To its member institutions, the FHLB Chicago offers standby letters of credit issued directly to a beneficiary for the member's account or to back up a member's guarantee of its customer's performance.
Letter of Credit Performance Guarantees may include:
Credit card processing accounts;
Workers' compensation and insurance premiums;
Working capital guarantees;
Lease payments; and
Use as a security deposit with government - for insurance obligations.
How Insurance Companies Use Letters of Credit
The FHLB Chicago is registered with the National Association of Insurance Commissioners (NAIC), which means insurance companies will accept FHLB Chicago letters of credit. Insurance companies that are FHLB Chicago members use standby LCs in a variety of situations:
LCs may be used as a security deposit for leasing space.
LCs may be used in cases where a state has special deposit requirements.
In court: If an insurance claim is filed in court and a judgment is rendered against the insurance company, the insurance company can post the judgment amount or an appeal bond in the form of an LC.
Reinsurance: Insurance companies may syndicate their exposures, which may require tangible collateral to be pledged to the reinsurer. An LC can be used for this purpose.
For more information about letters of credit please contact one of our LC Specialists or email firstname.lastname@example.org.
Hunter Kennedy (312) 565-5781
Brian Liu (312) 552-2667
Mike Palumbo (312) 552-1241
Jay Rutherford (312) 552-1285
To execute a letter of credit please contact the Member Transaction Desk at (855) FHLB-CHI (855-345-2244
), Option 1, or contact your sales director.