The Central Government on Saturday ended a two-month-long turf war between the Insurance Regulatory and Development Authority (IRDA) and the Securities and Exchange Board of India (SEBI), saying unit linked insurance products (ULIPs) will be regulated by the IRDA.
“Life insurance business shall include any ULIP or any such instruments. This would set at rest all the issues regarding ULIPs between two financial regulators,” the government said in a statement after promulgating an ordinance to make necessary changes in the law.
Besides, the government said a high-level committee chaired by Finance Minister Pranab Mukherjee would sort out all issues of jurisdiction regarding hybrid products.
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SEBI in April took the market by surprise when it banned 14 life insurance firms from issuing fresh ULIP schemes. However, the 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 and in the meanwhile had asked them to matain status quo. ULIPs account for more than 50 per cent of the life insurance business and the money collected is invested in equities.
The committee on hybrid products will include Finance Secretary, financial services secretary and heads of RBI, IRDA, SEBI and the Pension Fund Regulatory and Development Authority (PFRDA).
The ordinance promulgated by President Pratibha Patil on Friday amended the RBI Act, the Insurance Act, the SEBI Act and the Securities Contracts Regulation Act to bring about clarity on regulation of ULIPs. ULIPs are a hybrid instrument that combines both insurance and investment. While the Securities and Exchange Board of India saw ULIPs as investment products and hence asserted its right to regulate those products, the IRDA treats them as insurance instruments.
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