Meet This Year's Best Financial ETF

With all the fanfare and hype surrounding the Federal Reserve raising interest rates this year, the first such move in nearly a decade, it is not surprising that financial services stocks and the corresponding exchange traded funds have been decent performers.

For example, the Financial Select Sector SDPR XLF, the largest financial services ETF by assets, is higher by 1.7 percent year-to-date. That does not sound like much, but it is better than the less than one percent gain being sported by the S&P 500. While the big-name financial services ETFs have solid though not spectacular, more concentrated industry funds have shined.

The PowerShares KBW Property & Casualty Insurance Portfolio KBWP is a perfect example of that trend as the oft-overlooked insurance fund has surged nearly 15 percent this year, making it 2015's best-performing financial services ETF.

With rising interest rates commanding so much attention this year, it is not surprising that an insurance fund would rank among the best financial services ETFs. As is the case with regional bank stocks, insurance names are positively correlated to rising interest rates. Insurance ETFs deserve some credit for being positively correlated to rising Treasury yields. Simply put, steeper yield curves are advantageous for insurance providers.

The $96.6 million KBWP, which is just over five years old, is home to 24 stocks with weights ranging from 1.57 percent to 8.29 percent. KBWP follows the capitalization-weighted KBW Nasdaq Property & Casualty Index, which is rebalanced and reconstituted quarterly.

Well-known names in KBWP include Progressive Corp. PGR, Ace Ltd. ACE, Allstate Corp. ALL and Dow component Travelers Cos. TRV.

Another reason might be insurance ETFs' rising rates advantage is tied to the strong dollar. The stronger greenback affects an array of sectors and industry groups, but not insurance companies because U.S.-based insurance providers write the bulk of their policies here in the US.

Insurance ETFs, such as KBWP, can be used a complements to traditional financial services ETFs because those funds are not heavy on insurance providers. For example, XLF allocates just over 16 percent of its weight to insurance stocks.

Todd Shriber owns shares of XLF.