Markets may see fresh inflows as uncertainty over ULIPs ends

With the two-month long turf war between the two sectoral regulators over ULIPs coming to an end, stock markets are likely to see fresh money inflow in coming days

With the turf war between market regulator Securities and Exchange Board of India (SEBI) and insurance watchdog Insurance Regulatory and Development Authority (IRDA) over regulation of Unit Linked Insurance Plans (ULIPs) coming to an end, stock markets are likely to see fresh money inflow in coming days, reports PTI.

"The end of uncertainty over the regulation of ULIPS is a big relief for investors. Life insurance firms will be able to issue new ULIPs and fresh money will come into the market," SMC Capitals equity head Jagannadham Thunuguntla said on Sunday.

Unit Linked Insurance Plan (ULIP) is a hybrid instrument that combines both insurance and investment. ULIPs account for more than 50% of the total life insurance business in the country.

"Many investors were worried over ULIPs and after the end of row between the two regulators (SEBI and IRDA), fresh money from insurance firms is likely to come into the markets," Geojit BNP Paribas Financial Services research head Alex Mathews said.

On Saturday, the government ended a two-month long turf war between the two sectoral regulators, saying ULIPs will be regulated by IRDA. The government has issued an ordinance that clarified that life insurance business will include ULIPs or any such instruments.

President Pratibha Patil issued the ordinance late Friday evening amending the RBI Act, Insurance Act, SEBI Act and Securities Contracts Regulation Act.

Echoing the view, Bonanza Portfolio's vice president (equities) R L Narayanan said, "Insurance firms play a significant role in market and following the settlement over ULIPs, money supply will resume and insurers can come out with some new schemes."

ULIP, one of the most common insurance plans sold by life insurers, where the money collected from consumers is invested into equity and debt markets and returns are linked to the same, had become a bone of contention between the two regulators, with both claiming authority to regulate these schemes.

While SEBI saw ULIPs as investment products and hence asserted its right to regulate those products, IRDA treats them as insurance instruments.

In April this year, the market regulator took the market by surprise when it banned 14 life insurance firms from issuing fresh ULIP schemes.

Responding to the SEBI order, IRDA had asked all the 14 insurance firms to ignore the ban imposed by the market regulator and asked them to continue business as usual.

"Since the beginning of row, a number of life insurance firms virtually stopped the launch of new ULIPs and that in turn had blocked the movement of funds. The move is more important for those firms, which only sell ULIPs," a broker said.
 

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