India Government Rules IRDA To Oversee Unit-linked Insurance Policies
Jun 21, 2010
The following article was published by Dow Jones Newswires on June 21, 2010:
MUMBAI -(Dow Jones)- India’s government has ruled that the country’s insurance regulator, and not the Securities and Exchange Board of India, will be responsible for overseeing unit-linked insurance policies, putting an end to a more than two-month-long dispute between the two regulators.
ULIPs offer returns based on the market value of their underlying securities and also provide an insurance cover.
While these traits made the ULIP a popular product in India where the stock market gained more than 80% in 2009, a dispute arose between the capital markets regulator, SEBI, and the Insurance Regulatory and Development Authority over jurisdiction given the hybrid feature.
“….Life Insurance business shall include any Unit-Linked Insurance Policy, or scripts, or any such instruments. This would set at rest all the issues regarding ULIPs between (the) two financial regulators,” the government said in a statement Saturday.
In early April, SEBI barred 14 insurers from selling ULIPs, saying they resembled mutual funds and that the companies must register with the regulator to sell them.
But IRDA contested SEBI’s decision, saying insurance is the predominant feature of the product and that the mere existence of an additional investment feature couldn’t convert such policies into a mutual fund.
The two regulators agreed to jointly seek a binding legal mandate from an appropriate court after their chiefs met with Finance Minister Pranab Mukherjee on April 12. Meanwhile, insurers could continue to sell ULIPs, Mukherjee had said.
The government also said Saturday that it has formed a “high-level committee” under Mukherjee’s chairmanship to sort out all issues of jurisdiction on hybrid products.
Among the members of the committee will be chiefs of four financial regulators, the Reserve Bank of India, IRDA, SEBI and the Pension Fund Regulatory Development Authority, the government statement added.
-By Shikhar Balwani, Dow Jones Newswires; +91 22 6145 6123; shikhar.balwani@ dowjones.com
Find this article at: http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201006210208dowjonesdjonline000031&title=india-government-rules-irda-to-oversee-unit-linked-insurance-policies#ixzz0rUsKVO1k