Presumably they've hedged it, either directly or because they're holding sufficient assets with the right profile to make sure they can pay it in a broad range of scenarios.
So while this probably works out (especially if there is high inflation or high interest rates for some of the 100 years), I think the upside as a borrower is very limited, especially if this ends up being popular (if interest rates fall to 1% next year and stay there for 100 years, you didn’t get a great deal…you most likely just have a CD in a bancrupt institution).
FDIC insurance would cover the case where the bank went bankrupt. This is a strange financial instrument and I’m skeptical of it, but it’s not outlandish compared to other long held instruments like annuities. There might be some place for it in certain peoples portfolio.
I mean the simplest answer would be to buy 100-year government bonds, there are at least a few countries that do those.