Exchange-traded funds for insurers
Exchange-traded funds (ETFs) can help insurers like you achieve their general account objectives, with low risk-based capital requirements and bond-like accounting treatment.
In April 2017, the National Association of Insurance Commissioners (NAIC) passed a revision to their Statutory Accounting Principles (specifically, SAP 26, which allows insurers to report their designated fixed income ETF investments at either fair value or systematic value). Systematic value, an accounting methodology, permits insurers to report these designated fixed income ETF investments in a bond-like manner since they can be amortized from quarter to quarter on the NAIC filing. Compared to the fair value method, systematic value results in lower reported volatility.
Why consider fixed income ETFs?
There are several reasons why insurance companies may want to incorporate fixed income ETFs into their portfolios:
- More favorable risk-based capital treatment. Fixed income ETFs with a NAIC Designation can be reported as bonds or preferred stock by insurers.
- Exposure to non-traditional fixed income sectors. ETFs provide convenient and efficient access to non-traditional fixed income sectors (e.g., emerging market debt or senior loans) that may offer enhanced income opportunities beyond traditional exposures.
- Liquidity buffers in less liquid asset classes. Some fixed income ETFs may provide a more favorable implementation profile than their underlying holdings, helping to address challenges like illiquidity, price uncertainty, and high trading costs.
- Cash management. ETFs are often utilized to equitize cash positions and may serve as an effective stopgap for cash management.
Explore Invesco’s fixed income ETF suite
We offer seven fixed income ETFs that have earned a NAIC or preliminary NAIC Designation** from the NAIC’s Securities Valuation Office. Fixed income ETFs with a NAIC Designation can be reported as bonds or preferred stock by insurers, which allows for more favorable risk-based capital treatment.
A preliminary NAIC Designation cannot be used to report an ETF to state insurance regulators. However, the purchasing insurance company may obtain a NAIC Designation by filing the ETF with the NAIC's Securities Valuation Office — and we can accommodate the registration fee on your behalf.
| Ticker | Fund Name | Asset Class | NAIC Designation As of 4/2/2020 |
Inception date |
|---|---|---|---|---|
| BAB | Invesco Taxable Municipal Bond Portfolio | Taxable munis | Preliminary 1.G | 11/17/2009 |
| BKLN | Invesco Senior Loan Portfolio | Senior loans | Preliminary 4.A | 3/3/2011 |
| CLTL | Invesco Treasury Collateral Portfolio | Short-duration treasuries | Preliminary 1 .B | 1/12/2017 |
| GSY | Ultra-short duration Portfolio | Ultra-short duration bonds | Preliminary 2.B As of 6/8/2020 |
2/12/2008 |
| PCY | Invesco Emerging Markets Sovereign Debt Portfolio | Emerging market sovereign debt | Preliminary 3.C | 10/11/2007 |
| PHB | Invesco Fundamental High Yield Corporate Bond Portfolio | High-yield bond | Preliminary 3.C | 11/15/2007 |
| PICB | Invesco International Corporate Bond Portfolio | International corporate bonds | Preliminary 2.A | 6/3/2010 |
Fixed income ETFs with a NAIC designation can be reported as bonds of preferred stock by insurers, which allows for more favorable risk-based capital treatment.
Learn more about Invesco’s fixed income ETF suite.
