New Delhi: The government on Saturday ended a two-month long turf war between insurance regulator IRDA and capital market watchdog 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 the 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 will sort out all issues of jurisdiction regarding hybrid products.
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 and in the meanwhile had asked them to maintain 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, Insurance Regulatory and Development Authority (IRDA), Securities and Exchange Board of India (SEBI) and the Pension Fund Regulatory and Development Authority (PFRDA).
The ordinance promulgated by President Pratibha Patil last evening amended the RBI Act, Insurance Act, SEBI Act and Securities Contracts Regulation Act to bring about clarity on regulation of ULIPs.
ULIPs are a hybrid instrument that combines both insurance and investment.
While SEBI saw ULIPs as investment products and hence asserted its right to regulate those products, IRDA treats them as insurance instruments.
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