Govt throws weight behind IRDA on ULIPs row

New Delhi, Jun 19 (PTI) Clearly backing insurance
regulator IRDA in its turf war with SEBI, the Indian
government has issued an ordinance that clarified that life
insurance business will include ULIPs or any such instruments.
President Pratibha Patil issued the ordinance late Friday
night amending the RBI Act, Insurance Act, SEBI Act and
Securities Contracts Regulation Act.
By way of an explanation, the Ordinance clarified that
life insurance business shall include any Unit Linked Policy
or scrips or any such instruments.
"This would set at rest all the issues regarding ULIPs
between two financial regulators i.e. Securities and Exchange
Board of India (SEBI) and Insurance Regulatory and Development
Authority (IRDA)", the Finance Ministry said in a statement.
The ordinance attempts to bring to an end, the two-month
long battle between IRDA and capital market regulator SEBI,
which contended that ULIPs came under its regulatory
jurisdiction.
IRDA strongly opposed it and the issue reached the
Supreme Court.
ULIPs are a hybrid instrument that combine both
insurance and investment.
The government, according to the statement, has also
constituted a high-level committee chaired by Finance Minister
Pranab Mukherjee which will sort out all issues of
jurisdiction regarding hybrid products.
The committee on hybrid products will include Finance
Secretary, the Financial Services Secretary and heads of
RBI, IRDA, SEBI and the Pension Fund Regulatory and
Development Authority (PFRDA).
Welcoming the move by the government, Max New York Life
Insurance CEO and Managing Director Rajesh Sud said, "It
(ordinance) clarifies the status of ULIPs and any other
product which has elements of insurance."
The decision to form the committee on hybrid
instruments, he said, "Will help in resolving regulatory
issues quickly in the interest of investors."
SEBI in April took the market by surprise when it
banned 14 life insurance firms from issuing fresh ULIP
schemes.
However, IRDA asked the life insurers to ignore the SEBI
order and the matter then went to the Finance Ministry, which
advised them to move the court. In the meanwhile, the ministry
had asked them to maintain status quo.
Unit-Linked Insurance Plans (ULIPs) account for more
than 50 per cent of the life insurance business and the money
collected from policy holders are invested in equities. PTI DP
RBT


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