Unit-linked funds of insurance sector: SECP defines investment avenues

Updated 08 Aug, 2022

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has defined investment avenues for the unit-linked funds of the insurance sector for making investment in securities including government securities and Sukuks.

The SECP has issued SRO 1014(I)/2022, with the approval of the Policy Board, to amend the Unit-Linked Product and Fund Rules, 2015.

According to the SECP officials, the said rules were issued to address the investment governance process of the unit-linked funds, net asset valuation methodology and the disclosure of investment risk to the insurance policyholders.

Additionally, certain features of unit-linked life insurance products were also addressed such as premium indexation, minimum financial protection and minimum policy term. The regulations/ rules for unit-linked business would ensure the protection of policyholders’ interests, as well as, strengthening insurers’ internal controls over investment policy and processes. The rules will also ensure the protection of policyholders’ interests and a reduction in the overall systematic risk in the insurance sector, they added.

Under the amended rules, a unit linked fund may invest only in securities, government securities, Sukuks, commercial papers, deposit with Financial Institutions, place funds with financial institutions, units of collective investment schemes including Exchange Traded Funds (ETFs), units of REITs, units of Private Funds registered under Private Funds Regulations, 2015, real estate, future contracts, margin trading system (or MTS or any other mode approved by the Commission), or invest in any other avenues as notified by the Commission from time to time.

Open-ended mutual funds, ETFs: SECP allows insurance cos to make investment

The SECP has also issued categorization of Unit-Linked Funds. With effect from January 1, 2023, all unit-linked funds of life insurers shall be categorized in accordance with the specified investment criteria. The categories of the unit-linked funds included Aggressive Fund; Balanced Fund; Money Market Fund; Income Fund; Government Securities Fund and Fund of Funds.

With effect from January 1, 2023, all investments from unit linked funds shall adhere to the specified parameters and limitations.

Moreover, all unit linked funds shall be classified as per the risk profiles with effect from January 1, 2023, SECP added.

Copyright Business Recorder, 2022

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