Insights


Insurance Companies Accelerate ETF Investments

Research from Greenwich Associates and State Street Global Advisors uncovers a surge in ETF adoption by insurance companies. What's driving the increased use of ETFs? Read the report to find out.


3 Key Takeaways


In a survey of US insurance companies, Greenwich Associates asked respondents about their use of exchange traded funds (ETFs) and found:

1    The majority of insurance companies use ETFs —and expect to increase usage in the future.

  • 62% of study participants invest in ETFs in their general accounts.
  • 61% of current ETF investors expect to increase their ETF allocations in the next three years.
  • 82% of non-users expect to reconsider investing in ETFs in the next three years.

2    Insurance companies’ use of fixed income ETFs has accelerated.

  • The April 2017 decision by the National Association of Insurance Commissioners (NAIC) to allow insurers to apply the bond-like accounting treatment of “systematic value” to fixed income ETFs appears to have been a catalyst for growth, with a 69% increase in fixed income ETF assets from 2016 to 2017.1
  • One third of insurers now use ETFs for core fixed income and modifying exposures; that share is expected to jump to 47% in the next three years.
  • 29% of respondents use ETFs to target specific opportunities, expected to increase to 42% in three years.

3    ETFs support a broad range of applications, across company size and type.

  • Life companies use more fixed income ETFs (83%); P&C companies use more equity ETFs (92%).
  • Smaller insurers primarily use ETFs as strategic allocations, whereas larger companies use ETFs for both strategic and tactical portfolio management.
  • The most common applications for ETFs are eliminate cash friction (47%), optimizing asset allocation (45%), core equity and beyond (42%), implementing liquidity sleeves (34%), core fixed income and modifying exposures (34%).

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Considering ETFs?


Resources to guide your decision making

Regulatory Change Fuels Adoption

Hear from Jim Ross, Chairman of the Global SPDR® Business, about how regulatory changes helped ETF adoption surge with insurance companies.

NAIC Designations

Consult the SPDR® ETF Listing for Insurance Companies.



Relevant SPDR ETFs


SPMB

NAIC 1

SPDR Portfolio Mortgage Backed Bond ETF

Provides low cost access to agency mortgage-backed pass-throughs guaranteed by GNMA, FNMA and Freddie Mac.

FLRN

NAIC 1

SPDR Bloomberg Barclays Investment Grade Floating Rate ETF

For short-term liquidity needs and potential risk mitigation, floating rate investment-grade notes may provide some yield, but at a lower duration risk than fixed rate exposures.


SPIB

NAIC 2

SPDR Portfolio Intermediate Term Corporate Bond ETF

Provides a more targeted exposure to the intermediate corporate bond segment by focusing on the 1-10 year maturity bucket.


SRLN

NAIC 4

SPDR Blackstone / GSO Senior Loan ETF

An actively managed senior loan portfolio that monitors credit quality rather than following a passive loan index that does not emphasize credit selection.


State Street Global Advisors


A leader in fixed income index investing:


$451B

in fixed income assets 2


23 Yrs

of bond index investing


100+

Active and passive fixed income strategies


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Email Your Advisor

Consult your financial advisor about adding ETFs to your investment plan.


Visit the Blog

Get current insights and market commentary from our experts.


Read More

Visit our Insights page to access our latest thinking.

Footnotes

1 Raghu Ramachandran, “ETFs in Insurance General Accounts,” S&P Dow Jones Indices, May 2018.

2 State Street Global Advisors as of June 30, 2019.

Disclosures

Investing involves risk including the risk of loss of principal. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below the ETFs’ net asset value. Brokerage commissions and ETF expenses will reduce returns.

Asset Allocation is a method of diversification which positions assets among major investment categories. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss.

This material is for informational purposes only and does not constitute investment advice and it should not be relied on as such. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

State Street Global Advisors Funds Distributors, LLC, is not affiliated with Greenwich Associates.