In response to the initial query 'How safe is an ETF' you might find these additional comments useful, although technical.
In terms of how safe ETFs are, I am assuming you are referring to risks other than price risk. In that case, the main issue to be concerned with is counter-party risk i.e. the risks that the fund is exposed to outside your control.
To understand this issue, it is first important to outline that ETFs obtain their exposure to the relevant underlying index in one of two ways. The first is by buying the actual stocks in the relevant index. The second is by buying a derivative contract that in effect allows the fund to replicate the performance of the index.
For a fund that buys its own stocks there is no counterparty risk. It owns its own assets and that is that. For a fund that buys derivative contracts, it is then dependent on a third party to deliver on that contract. Post the Lehamns Bros debacle, everyone became extremely nervous about counterparty risk.
It is important to point out, however, that all EU listed ETFs (as opposed to US listed ETFs for example) are required to keep counterparty risk to 10% or less of their assets. iShares ETFs have an internal rule that limits counterparty risk to 5% and Deutsche Bank is eliminating counterparty risk altogether (I believe) from its ETFs. I am not sure to the same extent about the specific rules governing US-listed ETFs on the counterparty risk issue but I'd be amazed if they were not similar.
It's worth remembering that counterparty risk is much higher with Irish unit-linked funds. If you buy into such a fund, then the assets of such a fund are not separate to the insurance company assets. The significance of this point is that if the insurance company failed (went bust) then the fund's assets would not be treated separately to the insurance company and could be lost. To that extent, there is less risk in even the derivative-based ETFs.
Rory