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ANNUAL REPORT 2011-12
guidelines, which are effective from 1 st November,
2011. The guidelines inter alia provide that:
The policy can be revived within a period of two
years from the date of lapsation of the policy;
and
The fund management charges not exceeding
50 basis points can be levied on the discontinued
fund.
III.11 Regulating investment of funds by insurance
companies
III.11.1 During the year 2011-12, the Authority issued
further guidelines on ULIP and Venture Capital funds.
The summary of these are given below:
ULIP - Fund approval procedure and NAV process
The procedure is required to be followed for new Fund
approval. The guidelines require all the life insurers
to get their new Fund(s) approved by the Investment
department of the Authority. The guidelines also lay
down the ‘NAV’ calculation process.
The Authority clarified issues pertaining to transfer of
investments held between ULIP funds. It was indicated
that the transfer would be carried out during Market
Hours for equity and Debt fund at the prevailing price
and that NAV shall henceforth be computed without
appropriation/expropriation price under Unit Pricing
Methodology. The stipulation is applicable for all
existing policies. Clarifi cations have also been issued
on the following:
No individual security should be earmarked
between two or more ‘segregated fund’;
Specifying Segregated Fund Identifi cation
Number (SFIN) in SMS, tele-callings, radio
messages and ATM display;
Segregated funds having multiple plans, with
different fund management charges (FMCs)
attached to them or running ‘funds of funds
structure;
Assigning SFIN for ‘new’ funds launched;
Publication of information on Appropriation/
expropriation; and
Operating Constituents’ Subsidiary General
Ledger (CSGL) / Collateralised Borrowing and
Lending Obligations (CBLO) Account.
Investment in Venture Funds
Clarifi cation was issued by the Authority on Investment
in Venture Capital funds by Insurance companies.
These investments shall be subject to the following
conditions, as have been stipulated by the Authority:
Venture funds would continue to be categorized
under “Other Investments”.
Insurers may invest in venture funds registered
under SEBI Regulations, which also include
Micro, Small and Medium Enterprises.
No investment shall be made in a venture fund,
which is under the Promoter Group of the Insurer.
The fund shall not be managed by the Investment
Manager who is either directly or indirectly
controlled or managed by the Insurer or its
promoters.
The Investment Policy of the Insurer shall lay
down the policy to invest in venture funds or
Asset Management Company, and the internal
norms for such Investments shall be decided by
the Investment Committee (IC) of the Insurer.
The insurer shall comply with all the exposure
norms, mentioned in Annexure II of IRDA
(Investment) (Fourth Amendment) Regulations,
2008, and as amended from time to time.
III.12 Regulating maintenance of margin of
solvency
III.12.1 As per the Section 64 VA of the Insurance
Act, 1938 every insurer is required to maintain the
required Solvency Margin. The Authority reviews the
solvency margin requirement for different lines of
business periodically and makes changes, wherever
required.
III.12.2 In case of life insurance, the Authority has,
in the past, considered the need for reviewing the
solvency margin requirement for pure term products,
so as to help the insurers in launching more pure
term products for suffi ciently longer periods and at
affordable rates. The Authority also reviewed the
solvency margin requirement for the linked business
and proposed some factors with respect to linked
business in working out the required solvency margin.
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