Insurance bigwigs meet Irda chief over Sebi notice

As many as 31 CEOs of life as well as non-life insurance companies met J Harinarayan, chairman of the Insurance Regulatory & Development Authority (Irda), in Hyderabad to appraise him about the notice issued by the capital market regulator, Securities & Exchange Board of India (Sebi), and take the issue forward.

"Yes, I met the chief executives of life insurance companies which have been served the show-cause notice by Sebi," Harinarayan told FE. He has assured them of taking up the matter with Sebi soon.

Harinarayan also mentioned that apart from 13 life insurance companies who sell unit linked plans products, Sebi had sent a copy of the notice Irda as well. He said they were in the process of examining the notice and will respond soon.

Harinarayan clearly pointed out that it is Irda which is the regulatory authority for all kinds of the insurance products, including the Ulips. Earlier, Harinarayan had told FE that same financial products should not be regulated by multiple regulatory authorities.

Interestingly, Sebi served the notice to quite a few life insurance companies, like HDFC Standard Life, questioning the credibility of the pension products (that they sell) as life insurers, as these products do not cover life. Commenting on this, Harinarayan said all those pension products that have been covered under the Insurance Act, 1938, will have to be regulated by Irda only.

SB Mathur, general secretary, Life Insurance Council, which is the self regulatory body of life insurance companies, said even though the life insurance companies that have been served the notice will be responding to Sebi individually, the issue is basically to be discussed by the two regulators.

Life insurance companies have been selling Ulips for the past 10 years now and all of their products have to be approved by Irda. Hence, the Sebi notice, which came in the last week of January, took insurers by surprise.

On the earlier notice HDFC Standard Life for selling of the pension products, Mathur said that a reply had been sent and that they were awaiting a response from Sebi.

What the Sebi notice said

Sebi had issued notices during the last week of January to a host of life insurers, including ICICI (ICICIBANK.NS : 956.55 -7.1) Prudential, Max New York, Bajaj (BAJAJAUTO.NS : 2101.05 0) Allianz, Aviva and Aegon Religare Life Insurance, saying Ulips fall under the "collective investment scheme" category, which are largely investment accumulation products, and as per Section 12 1(b) of the Sebi Act, requires the market regulator's approval.

Besides, Sebi had asked them that life insurers are following unit-linked accounting, prescribed for mutual funds, to calculate the net asset value (NAV) of Ulips and should, therefore, be subjected to its regulations.