ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday announced new rules for life insurance sector to protect the interest of policyholders and strengthen control of insurers over investment policy and processes.
A news statement said the Unit Linked Products and Funds Rules, 2015 addresses the investment governance process of the unit-linked funds, net asset valuation methodology and the disclosure of investment risk to the insurance policyholders. The rules also govern premium indexation, minimum financial protection and minimum policy term.
“Life insurance business, underwritten in unit-linked form, has considerably increased over the past few years, reflecting in increase in market share of private life insurers,” the statement said. “A need was felt to introduce comprehensive regulations/rules for unit-linked business.”
The SECP said the growing popularity of unit-linked products is due to the flexibility insurers have in the product design and relatively lower level of investment guarantees. “This flexibility in the product design and low investment guarantees necessitated comprehensive regulatory framework,” it said.
“The new rules require that the investment governance process must be well structured and documented. Under new rules, the asset as well as liability characteristics of the insurance portfolio have to be considered. They also make the inclusion of the internal or the appointed actuary in the investment committee mandatory,” it said. “The investment policy shall explicitly mention the maximum allowable exposure to various asset classes, allowable exposure in a single entity, minimum rating or other investable criteria, ineligible asset classes, allowable exposure in related parties and investment performance monitoring frequency.”