ETF Expanding ETF usage: How insurers have put them to work

To understand how institutional asset owners are using ETFs at scale, Invesco partnered with Cerulli Associates to survey the market and interview investment decision makers across channels, including executives at two insurance general accounts (IGAs). For insurers, the findings point to ETFs commonly being used for cash equitization, portfolio transitions, tactical allocations, and long-term strategic holdings.²

Insurer ETF usage reached a record high

ETF holdings at IGAs reached a record $49 billion at the end of 2025, an increase of $10 billion from a year earlier and a 25% rise in assets under management. Insurers accounted for $4.9 billion in net ETF flows during the year, the second-largest annual inflow since 2015. Over longer periods, insurer ETF assets grew at compound annual rates of 10.2% over three years, 4.4% over five years, and 11.9% over 10 years.¹

Participation broadened alongside asset growth. Roughly 37% of insurers used ETFs in 2025, and the number of ETFs they held grew from about 500 five years ago to 768 by the end of 2025.¹ This breadth indicates that insurers have continued to expand ETF usage within their portfolio management process.

ETF usage also varied by insurer size. Large- and mega-sized IGAs allocated less than 1% to ETFs, while small and medium-sized peers allocated roughly 1% to 2%. Even so, small- and medium-sized insurers represented only 20% of total ETF assets at IGAs in 2025, indicating that most ETF assets remained concentrated among large- and mega-sized insurers.³

ETFs served as versatile portfolio management tools

Insurers have used ETFs in short-term, tactical ways, often to manage cash flows and liquidity. Many IGAs have also used ETFs for longer-term allocations, particularly when they sought access to niche markets or complementary exposure alongside other institutional vehicles.²

When looking at underlying asset class exposure, insurers' adoption of fixed income ETFs may reflect their role as portfolio implementation tools rather than simply sources of bond exposure. While insurers often allocate to private and less liquid assets to capture an illiquidity premium, fixed income ETFs can help manage liquidity, cash flows, and portfolio transitions. According to S&P Dow Jones Indices (S&P DJI), 42% of insurers' ETF holdings were in fixed income strategies at year-end 2025, primarily corporate bond exposures.¹ The benefits can be particularly relevant during periods of market stress, when ETFs may facilitate trading and provide market-based price signals for underlying fixed income exposures.

Insurer trading patterns appear to reinforce the cash flow management use case. S&P DJI tracks insurers’ ETF “trade ratio,” which compares the amount traded during a year with the amount held at the start of that year. The ratio ran between 1:1 and 2:1 for equity ETFs and 1:1 to 6:1 for fixed income ETFs from 2015 to 2025, suggesting relatively short holding periods.¹ That pattern is consistent with insurers using fixed income ETFs as a temporary home for incoming premium dollars until the assets can be deployed into their long-term fixed income portfolios.

ETF regulatory treatment unlocked new possibilities

IGAs must adhere to risk-based capital requirements, which is fundamental to understanding their ETF adoption. Before April 2017, the National Association of Insurance Commissioners (NAIC) required that all ETFs be treated as equity investments, carrying the corresponding high capital charge regardless of what the fund held. A bond ETF, for example, was treated like a stock.²

When NAIC guidelines began permitting bond-like treatment for certain fixed income ETFs at the national level, insurers gained a broader menu of investment options.² But the picture remains uneven because statutory treatment varies state by state. For example, New York’s decision in 2022 to provide more capital-friendly treatment for fixed income ETFs has been influential, though other states have not followed uniformly.⁴ As more states provide favorable capital treatment for ETFs, it is possible that insurer ETF usage may expand.

ETFs in action: How a medium-sized IGA used ETFs in multiple ways

One IGA with over $1 billion in assets shows how varied the applications of ETFs can be within one portfolio. The insurer allocated 5% to 10% of assets among five to 10 index-tracking equity and fixed income ETFs across three applications:

• Holding exposure while illiquid positions were built: ETFs provided diversification and served as a temporary vehicle while private debt investments were established, sometimes for years.
• Bridging transitions in liquid portfolios: ETFs delivered temporary exposure for three months or longer to niche markets at scale while the insurer explored separately managed account (SMA) relationships.
• Expressing tactical tilts: ETFs were used to implement medium- to long-term tilts or to gain exposure to a sector or region where establishing an SMA was operationally challenging, such as Asia-Pacific markets.

Looking ahead, the insurer pointed to two areas of interest: collateralized loan obligation (CLO) ETFs, which could be used to maintain proxy exposure to private debt while capital is committed, and active ETFs, which could help manage reserves constrained by regulations such as state deposit requirements.⁵

ETF use cases insurers are exploring today

IGAs are increasingly using ETFs as flexible portfolio tools. Across Invesco’s conversations with insurers, several common use cases continued to emerge:

• Accessing CLO exposure while maintaining liquidity: Insurers seeking exposure to the CLO market may use ETFs as a liquid implementation tool. This can be especially valuable when sourcing individual securities is less efficient or when maintaining portfolio flexibility is a priority. The Invesco AAA CLO Floating Rate Note ETF (ICLO) provides exposure to AAA-rated CLOs through a typically liquid ETF structure.
• Managing senior loan exposure and private credit allocations: Senior loan ETFs can serve multiple roles within insurance portfolios. Insurers may use them for tactical beta exposure to the loan market, as a liquidity sleeve alongside active loan mandates, or as a liquid placeholder while waiting to deploy capital to private credit managers. The Invesco Senior Loan ETF (BKLN) may be used in these types of applications because of its scale and liquidity.
• Helping enhance cash management and deploying idle cash efficiently: Insurance portfolios often need a liquid destination for excess cash while seeking income potential. Rather than leaving cash uninvested, insurers may allocate to an ETF strategy. The Invesco Ultra Short Duration ETF (GSY) may be considered as part of a cash management approach, offering the potential for income while maintaining portfolio flexibility.
• Broadening equity exposure and reducing concentration risk: Many institutional investors, including insurers, continue to evaluate ways to broaden equity exposure beyond market-cap-weighted benchmarks. Equal-weight strategies can help reduce concentration in the largest companies while maintaining broad market participation. In our view, concentration in large technology names in a market-cap-weighted equity portfolio may create additional risk management considerations for insurers who are seeing more debt related to AI capital expenditure growth in their fixed income portfolios. This approach has been often most relevant among property and casualty insurers, which typically employ larger equity allocations. The Invesco S&P 500 Equal Weight ETF (RSP) can complement traditional market-cap-weighted equity exposures and help address concentration risk.

Discover additional ETF insights

For insurers, evaluating ETFs involves more than the exposure itself. Balance sheet treatment, statutory and accounting requirements, governance, execution, and liquidity all matter. Invesco’s dedicated insurance ETF specialist team can help insurers assess ETF strategies that may fit within their regulatory, operational, and mandate requirements.

Download the full research report and explore Invesco’s institutional ETF capabilities.