U.S. insurance companies had $36.9 billion in exchange-traded funds in general accounts as of Dec. 31, an 18.4% increase from the year before, according to a report from S&P Dow Jones Indices.
Though the total invested in ETFs is a tiny fraction of the $7.1 trillion in U.S. insurance company general account assets, the report said the increase in ETF AUM in 2020 was at a higher rate than the 16% increase in 2019.
The report said the growth rate implies a doubling of ETF AUM every four to five years. S&P Dow Jones Indices has data tracked back to 2004, when there was less than $5 billion in ETF AUM in insurance company general accounts.
"The continued growth in ETF usage by insurance companies comes from both new companies starting to use ETFs, and companies which already use ETFs buying more ETFs," said Raghu Ramachandran, head of insurance asset channel at S&P Dow Jones Indices and author of the report, in a news release announcing the report.
"Even though insurers invest mostly in fixed income securities, they had historically invested in equity ETFs. However, in 2020, these companies increased fixed income ETF usage by 52%," he said. "I think it is also interesting that in 2020, insurers traded four times the amount of fixed-income ETFs they held at the beginning of the year. So they are using the liquidity of the ETF market to their advantage."
The report is available on the S&P Dow Jones Indices website.