Amid several trends — including regulatory changes, the great wealth transfer and industry integration — segregated funds have made a comeback.
At nearly $20 billion in 2025, “total new premiums are now at the highest level recorded over the last several years,” said Carlos Cardone, managing director, Canada, ISS Market Intelligence in Toronto. That compares to $16 billion in 2024 and $11.7 billion in 2023. (ISS Market Intelligence collects fund data monthly directly from insurance companies.)
Those new sales are close to double what they were two years ago, Cardone noted. And, given net redemptions in previous years of “several billions of dollars,” positive net flows last year of $287 million — though a relatively small figure — represent a turnaround for seg funds.
The 2025 growth in gross sales likely reflects, in part, demand for market exposure, which has benefited many asset classes.
“As expected, the vast majority of the new sales are connected to the chargeback [sales] option,” Cardone said.
Insurance regulators banned deferred sales charge (DSC) sales in segregated funds in 2023, following the DSC ban on the securities side in 2022.
“At this point, the chargeback has been extensively accepted … by advisors in general,” Cardone said.
Upfront compensation, including chargebacks, has been under the microscope in recent years. Segregated funds guidance released last fall — after a decade’s worth of regulatory work and consultations — introduced suitability obligations but continued to allow the chargeback.
Cardone said his outlook for seg funds is “more positive than it was just a few years ago.” One reason is that companies are “re-energizing” the product shelf with “more contemporary options.”
In 2025, his firm had discussions about strategy with 10 insurers that offer seg funds. The majority “mentioned that bringing ETFs as underlying investments in their seg funds is a high priority,” he said. “In terms of product development, that’s the biggest trend overall.”
At the end of last year, Manulife, for example, launched seg funds with exposure to BlackRock ETFs. Alongside such partnerships, integrated firms are leveraging their platforms to wrap their own ETFs in segregated funds.
Regarding his positive outlook for seg funds, “probably more importantly,” Cardone said, insurers are “training their wholesalers and the advisors themselves on use cases connected to estate planning,” often for high-net-worth clients and the growing demographic of those age 65+.
Reaching mid-market clients is more difficult, especially in the context of increasing regulation and rising costs.
“Addressing … the segment of the market that we typically call the mass affluent is becoming more capital intensive in general for dealers and insurance distributors,” Cardone said. “This is not new.”
And with the DSC ban, “the typical type of advisor that will make the mid-market their bread and butter cannot now necessarily count on the type of compensation that normally will make that possible.”
Vertical integration, as exemplified by a firm such as Industrial Alliance Insurance and Financial Services Inc., helps solve the challenge. Among integrated firms, salaried advisors are a trend, Cardone noted.
Also “pushing the market toward integration,” he said, is insurers’ greater oversight and compliance obligations toward dealers and distributors arising from Ontario’s proposed licensing rule for managing general agencies (now paused) and the new seg fund guidance.
Total cost reporting (TCR) adds to firms’ costs. Beginning in 2027 (for 2026 reporting), firms are required to provide enhanced annual statements to consumers, disclosing seg funds’ costs, embedded fees and investment performance.
Firms are mostly concerned about the required operations for the reporting, Cardone said: “They [are] saying the cost of running that and putting that in place is enormous.”
Among dealers and advisors, there’s less concern, he said. The perception is that “the breakthrough in terms of transparency was CRM2. Advisors in many cases back then were very scared about client reactions” — a fear that turned out to be largely unfounded, he said.
Now, “the expectation regarding TCR is that it’s a drop in the ocean of transparency and regulation.”