Regulatory Change Poised to Ignite Insurance Adoption of Fixed Income ETFs

Under the new guidelines for New York insurers, shares of certain fixed income ETFs can receive bond-like capital treatment. The new regulatory stance has the potential to accelerate insurers’ adoption of fixed income ETFs.

Adoption of fixed income ETFs by insurance companies is poised to accelerate following a rule change by the New York Department of Financial Services. The new regulation treats the shares of certain fixed income ETFs in a manner similar to bonds for the purpose of an insurer’s risk-based capital report. Insurers generally hold significantly less risk-based capital against debt than equity securities.

According to the new guidelines, an ETF can receive bond-like capital treatment if it meets certain criteria, including:

  1. The portfolio of the ETF consists of investments in fixed income securities, cash, and cash equivalents;
  2. The ETF tracks a bond index (i.e., is not actively managed) and makes publicly available no less frequently than monthly a detailed list of its holdings;
  3. The ETF has a minimum of $1 billion in AUM;
  4. The ETF allows in-kind redemptions;
  5. The ETF is registered pursuant to the Investment Company Act of 1940, 15 U.S.C. §§ 80a-1 – 80a-64;
  6. The ETF is rated by a nationally recognized statistical rating organization;
  7. The ETF is identified as qualifying for bond treatment by the Purposes and Procedures Manual of the NAIC Investment Analysis Office and has a preliminary or final NAIC Standard Valuation Office designation.

In light of the ratings standard (#6 above), our team has worked expeditiously to secure ratings for many SPDR® fixed income ETFs. Today, 19 of our fixed income ETFs meet the New York regulatory criteria. You can see the full SPDR ETF line-up here, along with NAIC designations and ratings where applicable.

Along with other major industry participants, SPDR provided input to the New York Department of Financial Services on the regulatory change, and we applaud the Department’s approach. In our view, it strikes an appropriate balance of providing New York insurers the certainty and clarity necessary to allow them to treat reserve investments in certain fixed income ETFs as investments in bonds rather than as equities while also imposing high thresholds of eligibility criteria that ensure robust investor protections, transparency, and access to liquidity.

Regulatory Shift Likely to Accelerate Use of ETFs by Insurance Companies

In recent years, fixed income ETFs have become mainstream components of insurance companies’ portfolios, providing a way for insurers of all sizes to achieve access to bond investment exposure.
The updated regulatory stance in New York has the potential to further ignite US insurers’ adoption of fixed income ETFs.

As shown below, US insurance companies’ total fixed income ETF investments previously amounted to $11 billion, or 1% of total bond ETF assets. New York insurers account for $1.1 trillion in fixed income AUM, equivalent to 24% of the US total. This appreciably large pool of capital is now better positioned to use ETFs within their bond portfolios.

US Insurers Fixed Income ETF Adoption

ETFs Provide Tools for Duration Management Ahead of Fed Policy Recalibration

Duration management is emerging as a central theme as investors prepare for a less accommodative policy stance from the Federal Reserve.

For insurance companies — including New York firms with newly expanded abilities to use fixed income ETFs — short-duration credit strategies may offer a highly liquid portfolio management solution to mitigating the impact of rising rates.



2021 Designation1

S&P Rating

Meets New York Criteria

Option Adjusted Duration as of 2/2/2022


SPDR® Bloomberg

1–3 Month T-Bill ETF






0.15 years


SPDR® Portfolio Short Term Corporate Bond ETF






1.81 years

Source: State Street Global Advisors, as of February 2, 2022.

As an ETF leader, our expertise has helped us build trusted partnerships with top insurance companies. To learn more about how we may be able to assist you and your clients, please reach out to the SPDR Insurance team, Benjamin Woloshin and Dewey Yoo.

For additional information, you can also access the following resources:

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