“The barriers historically preventing insurers from using ETFs broadly, such as regulatory/ accounting treatment and lack of integration with risk analytics, are being dismantled,” Suri said in the research note. “For instance, National Association of Insurance Commissioners (NAIC)-designated ETFs receive favorable financial statement and risk-based capital treatment in the US, allowing for increased GA usage.”
Moreover, insurers have utilized ETFs to position shift around market exposure ahead of Fed tapering.
“As the end of QE approaches, we also see a growing focus on reducing interest rate risk exposure by loosening benchmark constraints and diversifying into non-core fixed income assets and more absolute return strategies,” David Lomas, ACII, Head of Global Financial Institutions Group at BlackRock, said in the note.
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Max Chen contributed to this article.