Day after truce, SEBI says order applies to new ULIPs

April 13th, 2010 - 9:27 pm ICT by IANS  

Pranab Mukherjee Mumbai, April 13 (IANS) A day after Finance Minister Pranab Mukherjee brokered a ceasefire between the two warring financial regulators, capital markets watchdog Securities and Exchange Board of India (SEBI) Tuesday said its order banning sale of unit-linked insurance plans (ULIPs) would apply only to new products launched after April 9.
SEBI in its new order informed the 14 barred insurers that they can continue to sell ULIPs but will not be allowed to introduce any new product in this category without registering them with it.

“SEBI has decided to keep in abeyance, till further notice, the enforcement of the directions with respect to the ULIP schemes or products existing on the date of the order, i.e. 09.04.10,” said the order.

“However, with respect to any new ULIP schemes or products launched after 09.04.10, the directions mentioned in the said order will be enforced as indicated therein,” it added.

Asked about Tuesday’s order, Finance Minister Pranab Mukherjee said his ministry would look into it.

“I have not seen the SEBI order. We will examine it,” he said.

“Till yesterday (Monday) evening, both the parties had decided that they will seek a legal mandate from a competent court. The legal interpretation will be binding on them,” Mukherjee told reporters on the sidelines of an event at Gurgaon.

On Monday, finance ministry officials had met with SEBI chairman C.B. Bhave and the Insurance Regulatory and Development Authority (IRDA) chairman J. Hari Narayan to discuss their differences over the ULIPs.

SEBI had barred 14 insurers from selling ULIPs without its prior approval beginning Saturday. It felt that since these products have a major equities component they certainly came under its jurisdiction and it was only fair to regulate their business so as to prevent any move that may go against the interests of investors.

But IRDA responded by asking the insurance companies to ignore the order.

The insurance regulator said the markets watchdog’s move may force premature surrender of insurance policies, causing substantial loss to the policyholder and to the insurers, destabilising the markets and upsetting the financial stability.

The affected insurers are Aegon Religare, Aviva, Bajaj Allianz, Bharti AXA, Birla Sun, HDFC Standard, ICICI Prudential, ING Vyasa, Kotak Mahindra, Max New York, Metlife India, Reliance Life, SBI Life Insurance and TATA AIG.

During the first 11 months of the previous fiscal, a total of 1.67 million policies were sold with a total premium of Rs.44,611 crore ($9.9 billion). The total premium involved in these products amounted to Rs.90.645 crore (little over $20 billion).

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