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.
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.