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Daily Insurance Industry News
Thursday 20th of September 2018
November 9, 2011

New FSA rules for unit and index-linked products

by Gill Montia

Story link: New FSA rules for unit and index-linked products

The Financial Services Authority (FSA) has set out proposed new rules aimed at protecting policyholders with unit-linked and index-linked life insurance products, while taking account of new European requirements for insurers.

Solvency II will bring new high-level principles around how insurers’ assets, including unit-linked and index-linked funds, must be managed.

However, where individuals bear the direct risk of investing in unit-linked and index-linked policies, it will allow the FSA to continue to specify which assets can be used for such policies.

The proposed new rules therefore largely continue the existing FSA requirements but expand them to permit investment in some indices-based investments and bonds.

In addition, the regulator is implementing high-level requirements from Solvency II that strengthen the current rules, saying insurers should only invest in assets that they can properly value and monitor.

The FSA’s director of policy, Sheila Nicoll, comments: “While regulation cannot protect policyholders from market movements, these rules are designed to ensure that they can be confident that their money is being invested prudently.”

According to the FSA, the UK unit-linked long-term life sector has assets of £815 billion under management and a further £24 billion in index-linked policies.

 

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