ETF ETFs in 2026: How usage is evolving across insurance portfolios

Salman Zaidi, Head of Asset Manager & Insurance ETF Specialists at Invesco, discusses how market volatility, regulatory trends, and portfolio needs are reshaping ETF adoption across insurance general accounts.

Andrew Putwain: Can you introduce yourself, your role at Invesco, and the ethos that the company has around investing in ETFs?

Salman Zaidi: I lead the Insurance ETF Specialist team at Invesco. We partner closely with insurance general account portfolio managers and traders to evaluate and implement ETFs.

In practice, our role is part educator, part strategist, and part implementation partner. We spend a lot of time helping insurers think through balance‑sheet treatment, regulatory considerations, and trading and execution.

When it comes to our ethos, we view ETFs as portfolio tools, not just exposures. Their structural advantages—intraday liquidity, transparency, operational efficiency—certainly matter. But, for insurers, it’s also about fit within their regulatory framework. Our job is to help ensure ETF solutions align with their investment objectives while also meeting accounting, governance, and statutory requirements.

Breadth is another core component of our approach. We are the fourth-largest ETF provider with more than $800 billion in ETF AUM.¹ Our platform offers over 230 ETFs,² spanning traditional beta, but also differentiated exposures in bank loans, factor strategies, and alternatively weighted equities—capabilities insurers increasingly use to complement their core fixed income portfolios and surplus strategies.

Andrew: Invesco recently won Exchange Traded Products Provider of the Year at the Insurance Investor | North American Awards.³ Can you give us a debrief of the trends you're seeing in this market?

Salman: We’re honored by the recognition, especially since it underscores the growing momentum we’re seeing with insurers. In terms of trends, a few stand out.  

Number one, insurer participation is broad, even if allocations remain a small portion of overall general account assets. The U.S. insurance general account market is over $8 trillion,⁴ with ETF holdings representing just under $40 billion.⁵ Yet, roughly 35% of insurers have used ETFs in recent years,⁵ spanning more than 600 tickers.⁵ A decade ago, insurers used about 340 ETFs.⁵ By the end of 2024, that number had doubled to more than 680,⁵ and we expect that it will continue rising.

Second, usage patterns differ meaningfully by insurer type. Property & Casualty (P&C) insurers account for the majority of ETF AUM, with about $22 billion.⁵ This is driven by their higher equity allocations compared with life insurers.⁵ Life insurers hold about $11 billion, with a more balanced mix between equities and investment‑grade fixed income exposures⁵ that better match their liability profile. Health insurers remain smaller users, but adoption is increasing and is more evenly split between equity and fixed income ETFs.⁵

Third, regulation continues to shape adoption. State‑by‑state statutory treatment, particularly around bond ETFs, remains a major driver. For example, New York’s 2022 decision to provide more capital‑friendly treatment for fixed income ETFs has been influential, though not yet adopted uniformly by other states.

Finally, we’re seeing insurers reevaluate ETFs as portfolio management tools, especially given the structural liquidity and price discovery benefits observed during recent market stress, including COVID and Liberation Day.

Andrew: What are some specific examples of the type of issues that occur when working with insurers to implement ETFs?

Salman: ETF implementation in insurance portfolios isn’t just about selecting a ticker. It requires aligning accounting, regulatory, operational, and execution considerations.

Treatment under the National Association of Insurance Commissioners (NAIC) is typically the starting point, especially for fixed income ETFs.

Insurers need clarity on how an ETF will be classified, what the Risk-Based Capital (RBC) treatment will be, and how it fits into their statutory reporting framework. If a fixed income ETF doesn’t have a designation yet, many insurers won’t consider it. That said, there are situations where an insurer is comfortable with the ETF’s structure and willing to proceed while we help them apply for a preliminary designation. The timing of that designation needs to line up with their intended holding period, and it requires close coordination, but it’s a process we understand well and support end‑to‑end.

From there, execution becomes important, especially for larger insurers trading in blocks. ETFs are built to accommodate sizable trades, but the mechanics—approved brokers, block-liquidity checks, communication with internal trading desks—still have to be understood. Our Capital Markets team often plays a hands-on role here, helping insurers map out best execution.

Operational integration is the next key layer, and it can be especially nuanced for fixed income ETFs. Insurers need automated look‑through of holdings, cash flows, and risk data to ensure the ETF integrates seamlessly into their accounting and reporting systems. This requires coordination with custodians, vendors, and internal teams on data formats and delivery. Once those workflows are established, though, ETF usage typically scales naturally because the operational foundation is already in place.

Andrew: The markets have seen volatility over the past twelve months. What are some ways ETFs benefit insurers during this era, and how best can they be managed?

Salman: Market volatility isn’t new, but the tools insurers can use to navigate it have evolved meaningfully. In recent periods of stress, insurers have gravitated towards transparent, liquid instruments that allow them to adjust risk quickly. That’s where ETFs have proven particularly effective.

For insurers, the first benefit is flexibility. When spreads widen or markets move quickly, ETFs allow insurers to rebalance, manage liquidity, and adjust exposures intraday, offering faster execution and cleaner workflows than sourcing individual securities.

A second advantage is the way fixed income ETFs, in particular, behave during stress. Recent market environments have shown that ETFs can serve as efficient conduits for liquidity and price discovery, even when underlying cash markets are strained. As a result, insurers are increasingly using ETFs for temporary exposure while sourcing individual bonds, Asset Liability Management (ALM)‑aligned rate or credit adjustments, transition management, and as liquid proxies for harder‑to‑source assets like private credit.

We’ve seen this extend into more specialized segments as well. AAA CLO ETFs, for example, have grown meaningfully over the past five to seven years, offering the same liquidity and transparency benefits that high yield ETFs brought 15 years ago and loan ETFs, a decade ago. And, we expect similar patterns to emerge in other niche areas of fixed income over time.

ETFs are also increasingly being used for surplus and tactical allocation. They give insurers targeted access to areas like bank loans or factor‑tilted equities in a transparent, operationally straightforward manner.

Across all these applications, insurers who use ETFs most effectively tend to build repeatable frameworks: defining each ETF’s role, pre‑wiring execution workflows, aligning accounting treatment internally, and ensuring they have the analytics to monitor risk and liquidity. When those elements are in place, insurers are able to respond to volatility with more control and fewer operational hurdles.

Andrew: Is there anything that people might be surprised by in the world of ETFs?

Salman: One thing we see consistently is that once insurers begin using ETFs, it often opens the door to broader portfolio modernization. After the initial operational and accounting work is in place, insurers tend to expand beyond the first allocation and start exploring more strategic applications.

It’s also important to recognize how partnership‑driven this process is. Implementing an ETF inside an insurance general account touches far more groups than people expect—investment teams, accounting and reporting units, risk systems, compliance, trading desks, and in some cases regulators. Our role is to support that entire journey, not just the trade itself, and to make sure insurers have the clarity and consistency they need across all those workstreams.