Ulip investment caps likely to be relaxed

While in the normal course, the regulator is likely to cap the investment of such polices at 20 per cent, the ceiling can be relaxed by another 5 per cent with prior approval of the board through what is called discretionary limits.  According to sources close to the development, exposure to a single company or a fund is expected to be capped at 10 per cent of the policyholders fund or the total investment in a particular fund, whichever is less.  At present, there are neither single nor group company exposure norms for Ulips. The insurance regulator is in the process of working out the exposure norms for Ulip to avoid concentration of risk.  Ulip is a life insurance product that provides the benefits of protection as well as flexibility in investment, offering higher returns than usual covers.  The investment is denoted as units and is represented by the value that it has attained, called the net asset value (NAV). The policy value varies according to the value of the underlying assets at the time.  Concentration risk arises from excess investment in a fund or in a company where the fund is investing.  The idea is to prevent any downside to the policyholders