SEBI, IRDA seeking fast resolution of ULIP issue: CB Bhave

The Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) are working jointly to quickly find a legally binding resolution to the contentious issue of who should regulate the unit-linked insurance products (ULIP), SEBI chairman CB Bhave said. "We want to do move appropriate court quickly," the SEBI chief said in Singapore on the sidelines of a CII Conference on Indian Financial Markets. On April 15, SEBI moved the Supreme Court and some High Courts to guard against any ex-parte decision.

Bhave also sought to play down the tussle between SEBI and IRDA over ULIPs by saying that foreign institutional investors (FIIs) can continue to invest in existing ULIPs, which have a portfolio of over Rs920bn. There are no restrictions on investments in existing ULIPs, he said. SEBI's latest direction is against floating any new ULIPs, Bhave said. "FIIs should know what the correct position is and the correct position is that investors can continue to invest in current ULIPs and no new ULIPs are allowed," he said.

On April 12, SEBI modified its earlier directive and allowed life insurers to continue selling existing ULIPs. But the capital markets regulator barred the launch of new ULIPs by the 14 private sector life insurance firms mentioned in its original order until they seek permission from it. The IRDA reportedly rejected the toned-down version of the original SEBI order. "We will continue to approve insurance products as these fall within the ambit of insurance regulation," IRDA member R Kannan was quoted as saying.

On April 9, SEBI banned 14 life insurance companies from selling ULIPs without its approval, saying they needed to register with the regulator. On April 10, IRDA directed the insurers to ignore the SEBI order, forcing the Finance Ministry to step in. On April 12, SEBI and the insurance regulator IRDA agreed to maintain status quo on ULIPs and said they will seek a legally binding verdict on the thorny issue following the intervention of Finance Minister Pranab Mukherjee.