By BS Reporters
The ban on the sale and renewal of unit linked insurance products (Ulips) stands revoked, with the government brokering peace between the two financial sector regulators - Securities and Exchange Board of India (Sebi) and the Insurance Regulatory Authority of India (Irda).
"Status quo ante is being restored," finance minister Pranab Mukherjee told reporters on the sidelines of a function organised by Sebi.
Sebi had passed an order on Friday banning 14 of the 23 registered life insurance companies from selling Ulips, which are investment-cum-insurance products.
The insurance regulator, in response, asked the insurance companies to ignore the order and carry on business as usual.
"The chairmen of Irda and Sebi held discussions on the jurisdictions over the Ulip products. To resolve any ambiguity, and to ensure smooth functioning in the markets, the regulators have agreed to jointly seek a binding legal mandate from an appropriate court," Mukherjee said.
The two regulators have decided to approach the court within a week to resolve the row over regulation of Ulips.
"The two regulators have decided to file a joint application over the jurisdiction on regulation of Ulips. We will approach the court in another 4-5 days," said a senior official who was part of the meeting of the regulators.
Another person present in the meeting added that the Finance Minister expressed his displeasure over the spat between the two regulators earlier in the day.
According to data available with Irda, at the end of March 2009, there were 70.3 million Ulips in force involving a premium of Rs 90,645 crore. Between April 2009 and February this year, another 1.67 million policies were sold, with a premium of Rs 44,611 crore.
Insurers say a ban on sale and renewal of Ulips sold by all insurance companies would have led to the bulk of the Rs 75,000 crore investment in the stock markets being withdrawn.
Earlier today, the finance ministry swung into action and met both the financial regulators to discuss the issue and look for a possible solution.
Ahead of the meeting with finance secretary Ashok Chawla, Irda chairman J Hari Narayan told reporters the two regulators needed to have greater clarity on their respective jurisdictions.
When asked whether the finance minister had called the regulators to arrive at a decision, he stated: "I don't think I have come here for a decision. I am here to give a perspective on the issue. Sebi does not have jurisdiction on Ulip products. Sebi believes otherwise. Their decision will have negative impact on the financials of policyholders and insurance companies."
|THE 72-HOUR STANDOFF |
APRIL 9: Stock market regulator Sebi bans 14 life insurance companies from selling Ulips with immediate effect
APRIL 10: Insurance regulator Irda asks insurance companies to ignore Sebi order and carry on business as usual
APRIL 12: Government brokers peace between Sebi and Irda. Ban on sales and renewal of Ulips lifted.
When asked whether Irda has powers to quash a Sebi order, Hari Narayan said: "I don't have any power to quash Sebi's order, but I certainly have the powers to direct insurance companies to act or not to act."
He added Irda already had two rounds of discussion with Sebi on the issue.
By evening, the situation changed, with the two sides agreeing to return to the earlier status quo. The companies, which came under the Sebi ban include Reliance Life, SBI Life, ICICI Prudential, Tata AIG and HDFC Standard Life. The market regulator was also planning to expand the order to nine other companies, which included the state-run Life Insurance Corporation, Future Generali India Life, IDBI Fortis and Canara HSBC among others.
After the meeting, Hari Narayan said the finance secretary wanted to understand their perspective and that there would be more meetings on the issue. Sebi chairman C B Bhave also met Chawla separately after Hari Narayan.
The tussle had an impact on the markets as Sensex fell 80.14 points to close at 17,853.