The Securities and Exchange Commission of Pakistan (SECP) has issued
draft Unit Linked Products and Funds Rules, 2014, to elicit the public
opinion.
In this regard the Commission has issued through S.R.O 68(I)/2014 on
January 30, 2014, says a statement.
The life insurance business underwritten in unit-linked form has
increased considerably over the past few years, reflecting an overall
increase in private life insurers' market share.
A need has been felt to introduce comprehensive regulations/rules for
unit linked business to ensure the protection of policyholders'
interest as well as strengthening insurer's internal controls over
investment policy and processes.
The new rules have addressed broad product features from a regulatory
perspective, such as minimum financial protection, premium indexation
and maximum aggregate commission on unit linked business.
However, the primary focus of these rules has been on addressing the
investment governance process of the unit linked funds, net asset
valuation methodology and the disclosure of investment risk to the
insurance policyholders.
The new rules have also broadened the statutory role of the appointed
actuary by requiring his inclusion in the investment committee.
The draft rules require that the investment governance process be more
structured, documented and consider the asset as well as liability
characteristics of the insurance portfolio.
It is further required that statutory auditors should give a separate
opinion on the accounts of unit linked funds.
A statement of investment performance measurement has also been required.
The draft rules also require that an annual statement of the unit
account should be sent to policyholders to improve communication of
insurance policy benefits to the customers.
The growing popularity of unit linked products is due to the
flexibility that insurers had in the product design and relatively
lower level of investment guarantees.
This flexibility in the product design and low investment guarantees
has sometimes been misused by the insurers, which require a more
proactive regulatory action, the statement of the Commission said.
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