The NAIC designations range from 1, or highest quality, to 6, or lowest quality. ETFs that are not NAIC designated are considered equities under the NAIC Financial Conditions Framework, even if the underlying assets are debt securities.

In recent years, the NAIC has revised its designations to allow fixed-income ETFs to carry the same dispensations as bonds – fixed-income ETFs originally fell under the same designation as equity ETFs, which caused insurers to pay higher capital charges on the bond ETFs.

Among the top insurers with ETF holdings, USAA Insurance Group held $1.6 billion in ETF assets, including large positions in Vanguard Short-Term Bond ETF (NYSEArca: BSV), iShares Core MSCI EAFE ETF (NYSEArca: IEFA) and SPDR S&P 500 ETF (NYSEArca: SPY).

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The most popular ETF among all insurers was the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD).

“Although life insurance companies have the most general account assets, property and casualty insurance companies have been the more frequent adopters of ETFs,” Rosenbluth added.

Equity ETFs were the most common among life insurers but they also held a larger portion in fixed-income ETFs than P&C insurers.

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