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View Full Version : SEBI nod must for ULIPs by insurance companies



v.r.s.nathan
10-04-2010, 11:55 AM
Market regulator SEBI has barred 14 private life insurance companies from selling unit-linked insurance plans without its approval, giving a fresh twist to the turf war between SEBI and insurance watchdog IRDA. “We expect some companies to move the court” said the CEO of a life company. “It is unfortunate that this dispute has been allowed to reach this stage. It is time for the finance ministry to intervene” he added.
In an order signed by Prashant Sharn, wholetime director, SEBI, said, “I hereby direct the entities mentioned in this order not to issue any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and/or additional subscription for any product (including Ulips) having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from SEBI”
The 14 companies mentioned in this order include Aegon Religare, Aviva, Bajaj Allianz Life Insurance, Bharti AXA, Birla Sun Life, HDFC Standard Life, ICICI Prudential, ING Vyasa Life, Kotak Mahindra Old Mutual Life, Max New York Life, Metlife India, Reliance Life, SBI Life, TATA AIG Life.
A few months back, SEBI had questioned individual life companies why they were selling investment products without its approval. Companies had responded individually that insurance laws permit them to offer an investment component within a life insurance policy. They also said that they were regulated by SEBI who had cleared all these products. The life companies were supported by the market regulator, who reiterated the stand taken by life companies.
In its final order SEBI said, “I find that the entities by their own admission have stated that there are two components of Ulips - an insurance component where the risk on the life insurance portion vests with the insurer and the investment component where the risk lies with the investor. This establishes conclusively that Ulips are a combination product and the investment component need to be registered with and regulated by SEBI”
SEBI’s order has implications not only for the life insurance companies but also for their promoters who have sunk in over Rs 26,000 crore in the form paidup capital. According to analyst reports, a significant portion of the value of various companies including, ICICI Bank, Aditya Birla Nuvo, SBI Life and Bajaj Finserve. Most of the business written by these companies is through Ulips. If these companies are barred from selling Ulips, their valuations are likely to be hit.

vinks
10-04-2010, 05:22 PM
The 14 companies are SBI Life, ICICI Prudential, TATA AIG, Aegon Religare Life, Aviva Life, Bajaj Allianz, Bharti AXA, Birla Sunlife, HDFC Standard Life, ING Vysya Life, Kotak Mahindra old mutual life, Max New York Life, Metlife India and Reliance Life.

Expert
11-04-2010, 11:47 AM
Sebi’s order asking 14 insurance companies to stop selling unit-linked insurance plans has turned into full-fledged regulatory battle with the Insurance Regulatory and Development Authority issuing its own order directing the 14 companies to continue selling ULIPs.
“After due consultation with the members of the consultative committee all the 14 insurance companies which are mentioned in the order of Sebi are directed to note that notwithstanding the said order of the Sebi, they shall continue to carry out insurance business as usual including offering, marketing and servicing ULIPs in accordance with the Insurance Act 1938” IRDA said in a late evening order on Saturday signed by chairman J Harinarayan.

v.r.s.nathan
12-04-2010, 06:29 PM
The government on Monday said the two regulators SEBI and IRDA have agreed to maintain the status quo that existed before marketSEBI-IRDA ULIP Row regulator's ban on 14 life insurers from raising funds for unit-linked schemes.
The status quo will be maintained till a court decides who can regulate ULIP schemes, Finance Minister Pranab Mukherjee told reporters here.
ULIP is an insurance product in which a bulk of the premiums is invested in equities and bonds.
"To resolve any ambiguity and to ensure smooth functioning in the market, the regulators have agreed to jointly seek a binding legal mandate from an appropriate court," Mukherjee said.
"Meanwhile, status quo ante is being restored," he told reporters outside the finance ministry.