Search Form

The iShares team provides insurance companies of all sizes with consultative solutions, product information, best-execution guidance and the most NAIC-designated ETFs in the market1.

How Insurers are Using iShares ETFs

The following case studies showcase how institutional investors can benefit from ETFs.

General AccountsInsurance Products

A large reinsurer reallocates its holdings while minimizing costs.

An insurance annuity product provider uses ETFs to reduce capital commitments and manage volatility.

Insurance company diversifies their holdings to enhance their portfolio’s potential overall yield.

A large life insurance company benefited from the breadth of ETF offerings to gain downside protection.

A mid-size insurance company uses interim exposure to muni bonds while waiting for new issue.


Top Questions from Insurers

  • What are the benefits of using iShares ETFs in general account bond portfolios?

    Based on our analysis of data from insurance company statutory annual filings, we estimate the U.S. domestic insurance industry increased its collective general account holdings of ETFs from $3.9B at year end 2005 to $10.5B at the end of 2012. There are approximately 500 insurance companies with 650 total entities that use ETFs.2

    A typical insurance company’s primary investment objective is to manage the economic risks of its liabilities. Generally, insurers invest in a fixed income-only portfolio that is duration matched to the expected liability cash flows. iShares Fixed income ETFs can help insurance companies manage challenges they may face when investing for the general account. Some benefits of using ETFs include:

    Put cash to work quickly, and then add bonds strategically
    Declining bond liquidity makes investing cash balances more challenging; iShares ETFs can provide quick beta exposure to help minimize execution risk.

    With iShares ETFs providing short-term beta exposure, a manager can be patient and opportunistically add bonds.

    This greater flexibility provides an opportunity to enhance yield and lower transaction costs while increasing liquidity.

    Access hard-to-reach markets
    iShares ETFs open up new asset classes where portfolio managers can invest to enhance portfolio construction.

    U.S.-listed funds provide diversified, one-trade exposure to non-U.S. corporates or sovereigns.

    iShares ETFs also provide exposure where PMs may not have research coverage such as emerging market debt or CMBS.

    Cost efficiency
    iShares ETFs generally offer price improvement as the ETF is often less expensive to trade than the underlying securities of the respective index.

    Flexibility
    With 61 iShares fixed income ETFs, investors can customize exposure based on desired credit, yield and duration characteristics.

    NAIC-designated ETFs
    56 iShares ETFs have NAIC designations.

  • If I can own a separate account for less than 10 bps, why would I buy an ETF for more?

    The primary reason to consider ETFs relative to separate accounts is overall flexibility and convenience. ETFs can give you access to any position without a minimum investment size, while separate accounts typically require $50 million. In addition, separate accounts can often take at least a month to set up while ETFs are bought and sold on exchanges and can be accessed quickly.

    An insurance company looking to establish an investment in an asset class could use an iShares ETF to obtain exposure while constructing a long-term portfolio. For example, because of illiquidity in municipal bond markets, it can take a significant amount of time to build a diversified portfolio. While the portfolio is being developed, the insurance company can gain their desired municipal bond beta exposure by purchasing an iShares ETF. iShares municipal bond ETFs aim to hold the most liquid names, providing a cost effective interim beta allocation. An insurance company may also look to hold an iShares ETF while searching for a new manager or replacing an existing manager.

  • Why are iShares ETFs advantageous for small portfolios (less than $500mm portfolios)?

    iShares ETFs are cost-effective and provide access to markets that are prohibitively expensive to trade for smaller portfolios. iShares ETFs:

    - Bring scale to management of smaller accounts through on-exchange trading simplicity.

    - Offer single trade diversification, even at low notional amounts.

    - Can be used to construct portfolios with high liquidity and robust exposures to help meet investment objectives more precisely.

    - Offer a cost-effective route to diversified market exposure. In particular, the iShares Core Series is a suite of competitively priced ETFs.

    By purchasing an iShares ETF, an investor receives the benefits of professional portfolio management and the economies of scale associated with trading an entire portfolio as a single unit. iShares ETFs enable investors to enter and exit positions efficiently, as the ETF helps reduce the impact of costs such as foreign taxes and commissions across all of the securities.

    Overall, iShares ETFs provide professional portfolio management and access regardless of portfolio size.

Read the complete list of questions and answers


NAIC Designations for iShares ETFs

The Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC) assesses the credit quality of fixed income securities and assigns them designations.3

Learn more about iShares NAIC-Designated ETFs


Follow the Flow

A weekly look at U.S.-listed ETP primary market trends from the U.S. iShares Capital Markets team

Download Follow the Flow


Pre-trade Analysis

This sample iShares pre-trade analysis report shows how an insurance client could execute a trade of $254 million of the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) – approximately 85% of LQD ADV4 – with minimal costs and market impact.

Read the report


ETF Perspectives

Subscribe to ETF Perspectives

Sign up to receive our quarterly newsletter and get expert opinions on the industry, detailed information on ETF products and research-based, thought leadership.

Subscribe Now

1Source: NAIC Purposes and Procedures Manual of the NAIC Securities Valuation Office. July 2013 – Volume/Issue: 12/02.

2Source: BlackRock.

3The NAIC does not endorse or recommend any securities or products, including iShares ETFs. NAIC designations are issued for specific regulatory purposes and these designations are not equivalent to credit rating issued by nationally recognized statistical rating organizations. NAIC designations are suitable only for NAIC members.

4Source: BlackRock, Bloomberg, as of 2/28/13. ETF ADV is calculated as a 20-day average through 2/28/13 and is subject to change.

Contact Us

Raman Suri

Raman Suri
415-670-7601
Email

Benjamin Woloshin

Benjamin Woloshin
212-810-5859
Email

phone

iShares Insurance Team
877-944-4232

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares ETF and BlackRock Mutual Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

There may be less information on the financial condition of municipal issuers than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Some investors may be subject to federal or state income taxes or the Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

Diversification and asset allocation may not protect against market risk or loss of principal.

Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Cohen & Steers Capital Management, Inc., European Public Real Estate Association (“EPRA®”), FTSE International Limited (“FTSE”), India Index Services & Products Limited, JPMorgan Chase & Co., MSCI Inc., Markit Indices Limited, Morningstar, Inc., The NASDAQ OMX Group, Inc., National Association of Real Estate Investment Trusts (“NAREIT”), New York Stock Exchange, Inc., Russell Investment Group or S&P Dow Jones Indices LLC, nor are they sponsored, endorsed or issued by Barclays Capital, Inc. None of these companies make any representation regarding the advisability of investing in the Funds.  BlackRock is not affiliated with the companies listed above. Index data related to the underlying indexes is provided by the respective companies above.

Neither FTSE nor NAREIT makes any warranty regarding the FTSE NAREIT Real Estate 50 Index, FTSE NAREIT Residential Plus Capped Index, FTSE NAREIT Industrial/Office Capped Index or FTSE NAREIT All Mortgage Capped Index; all rights vest in NAREIT. Neither FTSE nor NAREIT makes any warranty regarding the FTSE EPRA/NAREIT Developed Real Estate ex-US Index, FTSE EPRA/NAREIT Developed Europe Index or FTSE EPRA/NAREIT Developed Asia Index; all rights vest in FTSE, NAREIT and EPRA. “FTSE®” is a trademark of London Stock Exchange Group companies and is used by FTSE under license.

©2014 BlackRock, Inc. All rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, ALADDIN, iSHARES, iBONDS, iSHARESBOND, iSHARESBONDS, iSHARES CONNECT, LIFEPATH, SO WHAT DO I DO WITH MY MONEY, INVESTING FOR A NEW WORLD, BUILT FOR THESE TIMES, CoRI and the CoRI logo are registered and unregistered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

iS-12559