DEFINITION of 'Insurance Industry ETF'

A sector-following fund that invests primarily in insurance companies, so as to obtain investment results that closely track an underlying index of insurers. An insurance ETF invests in all types of insurers, including property and casualty insurers, life insurance companies, full line insurers and insurance brokers. Depending on its mandate, such an ETF may also hold international insurers, or may be restricted to domestic insurance companies only.

BREAKING DOWN 'Insurance Industry ETF'

Since they are a part of the financial services sector, insurers are susceptible to the same cyclical forces that affect other financial companies. For example, insurance indexes and ETFs based on them reached multi-year lows in the financial crisis of 2008, but participated in the market rally that commenced in 2009.

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