Many insurance companies are steering clear of exchange-traded funds even after a high profile rule change designed to make them easier to own.

Almost 40 percent of insurers aren’t using ETFs more than a year after the National Association of Insurance Commissioners rewrote its accounting rules in an attempt to loosen the restrictions, according to a new survey sponsored by State Street Corp. and conducted by Greenwich Associates. For more than a third of non-users, internal policies and state regulations are to blame, the study showed.

That’s a setback for ETF issuers like State Street, the third-largest in the U.S., that want to attract some of the trillions that insurers manage. BlackRock Inc. forecast two years ago that as much as $300 billion would flow into debt-focused funds by 2022 thanks to the regulatory shift, which was supposed to make it easier to compare debt ETFs to bonds. But so far, it’s been slow going.

“It’s still lower than I would think it would be at this point but we’re excited to see the prospects,” said Chad Nettleship, an insurance specialist for State Street’s ETF business. “The regulatory changes are fairly recent.”

Greenwich Associates interviewed 52 insurers overseeing about $1.9 trillion between September and October last year. About 40 percent of those companies were life insurers, and another 40 percent were property and casualty companies.

Patchy Reform

The patchwork nature of U.S insurance regulation seems to be at least partly responsible. Insurers are regulated state by state, with the NAIC making model laws that state officials then decide whether to adopt. Limits remain on the amount of exposure insurers can have to a single issuer, a problem given that more than 80 percent of ETF assets are in funds run by just three issuers.

Meanwhile less than half of insurers surveyed have embraced the new valuation system, which is more akin to the way bonds are accounted for.

Still, it isn’t all bad news for companies that offer the funds. Insurers that do own ETFs are using them instead of cash and to create equity and fixed-income portfolios, according to the study. And 42 percent expect to use ETFs to capitalize on specific debt opportunities in three years time, up from 29 percent now, the survey showed.

Even the holdouts may come around, eventually. Of the 11 non-users that responded to a question on whether they would ever reconsider ETFs, more than 80 percent said they would. But for more than a quarter of those, that’s unlikely to happen within the next three years.