(3)      Custody of Assets

(a)      All listed securities shall be held in accounts held by the life insurer with the central depository company and in sub-accounts designated for each fund. The investments in government securities of Unit Linked Fund shall be held in an IPS (i.e. investor’s portfolio services) account of the company.

(b)      Ownership documents for all other assets shall be kept with a custodian approved by the board of directors of the insurer.

(c)      Bank accounts including fixed deposits shall be maintained in clearly designated accounts for each fund.

(4)  Inter-Fund Balances

(a)      Transactions between the investment fund and other funds of the life insurer shall be kept to a minimum. It is recognized, however, that there will be some essential transactions, for example the payment of monies into a fund on allocation of premiums/contributions and the payment of monies by the fund on redemption of units/investment.

(b)      Any balances created with other funds (unit-linked and otherwise) shall be settled within 15 working days.

11.  Net Asset Valuation (NAV) Pricing Methodology.–

(1)      General Principles

(a)      Unit prices should be calculated in a fair and transparent manner, which means:–

(i)       Unit pricing methodology shall ensure that the transactions in a Unit Linked Fund are executed in a manner that it should not affect the interests of the policy-holders.

(ii)      Prices shall be based on the net asset value, adjusted for charges and purchase and sale costs.

(iii)     Cross-subsidy among policy-holders or individual funds shall be avoided as far as reasonably possible. In particular, any adjustments to smooth unit prices shall be avoided.

(iv)     The pricing mechanism shall not be used as a deliberate means of extracting value from the fund or from policy-holders.

(b)      Expenses, income and taxation should be recognised appropriately in the price, being accrued in a timely and accurate manner so that the unit price properly reflects the value of the underlying assets.

(c)      For each fund the investment committee shall approve the pricing policy and procedures, which will set out the following:–

(i)       Pricing Frequency

(ii)      Pricing Model

(iv)     Valuation of Assets and Liabilities and Adjustments

(2)      Pricing Frequency and Unit Transaction Timing

i.        All Unit Linked Funds created after the promulgation of these rules shall be valued daily. Funds in existence at the time of issue of these Rules may continue to be valued weekly (but not less frequently than this) until June 30, 2015. Where a fund is valued on a weekly basis this shall be on a given time on, a given day in each week. In case of the designated day of the week being a holiday the valuation should take place on the previous working day.

ii.       Where a fund is valued on a daily basis the price should be updated on a specified time at the end of the day. In the unusual event of a fund being priced more than once per day, this will be disclosed to policy-holders through insurer’s web site.

iii.      The timing of unit transactions such as allocation to policy-holders, creation and cancellation of units will be determined according to events such as the receipt of policy-holder instructions, issuance of policy and realization of renewal premium etc.

iv.      The following objectives should be taken into account when determining pricing frequency and unit transaction timing:–

(a)      Avoiding any losses to policy-holders through market timing and other ‘strategic dealing activity'.

(b)      Maintaining, within defined risk-return appetite, appropriate levels of liquidity in the fund to avoid any significant, unintended gearing effects.

(c)      Ensuring that funds designed to track the performance of an underlying asset do so within defined tolerances avoiding the risk of any significant distortion or deviation.

(d)      Avoiding any material loss to the fund or policy-holders by ensuring a good match between net policy-holder unit transactions and the related asset purchase or disposal.

(e)      Avoiding any material loss to the fund or policy-holders by ensuring there is no undue delay between receipt of an instruction from a policy-holder and the resulting unit transaction.

(3)  Pricing Methodology: All life insurers issuing unit-linked contracts shall follow the Forward Pricing methodology by June 30, 2015. Unit acquisition and redemption transactions which occur during two pricing dates would be held in abeyance until the next valuation date and executed at the price determined at the next valuation date.

(4)  Valuation of Assets and Liabilities and Pricing Adjustments

(a)      The following basis for valuing various assets shall be followed when determining the price at which units are to be allocated or redeemed:

(i)       A security listed on a stock exchange shall be valued at its closing price on such exchange on the date as of which it is valued, or if such exchange is not open on such date, then at its last sale price on the next preceding date on which such exchange was open and if no sale is reported for such date, the security shall be valued at an amount not higher than the closing asked price nor lower than the closing Bid Price. If there is no active market for a security, however, it should be valued in accordance with the applicable financial reporting framework.

(ii)      An investment purchased and awaiting payment against delivery shall be included for valuation purposes as a security held, and the cash account of the company shall be adjusted to reflect the purchase price, including brokers' commission and other expenses incurred in the purchase thereof but not disbursed as of the valuation date;

(iii)     An investment sold but not delivered pending receipt of proceeds shall be valued at the net sale price. For takaful operators such investment shall continue to be shown as held by the unit-fund but the value shall be taken as the net sale proceeds. For other insurers the net sale proceeds shall be shown as an amount receivable and the securities shall not be shown as held by the Unit Linked Fund.

(iv)     A Government fixed income security for which there is no secondary market shall be valued so as to recognize a uniform return from the time of acquisition to maturity.

(v)      The value of any dividends, bonus, shares or rights which may have been declared on securities in the portfolio but not received by the fund as of the close of business on the valuation date shall be included as assets of the fund, if the security upon which such dividends, bonuses or rights were declared is included in the assets and is valued ex-dividend, ex-bonus or ex-rights as the case may be.

(vi)     A security not listed or quoted on a stock exchange shall be valued at investment price or its breakup value as per last audited accounts, whichever is lower.

(vii)    Interest accrued on any interest-bearing security in the portfolio shall be included as an asset of the fund if such accrued interest is not otherwise included in the valuation of the security.

(viii)   Any other income accrued up to the date on which computation was made shall also be included in the assets; and

(ix)     All liabilities, expenses, taxes and other charges due or accrued up to the date of computation which are chargeable under these Rules shall be deducted from the value of the assets.

(b)      To determine the Offer Price the net asset value may be adjusted by adding:–

(i)       a front end load not exceeding the amount declared in the policy document;

(ii)      a provision for acquisition costs of investments, being the average cost of acquisition given the actual asset mix of the fund; and

(iii)     a rounding adjustment not exceeding the forth decimal place as specified in Rule 10(3) above.

(c)      To determine the Bid Price the net asset value may be adjusted by deducting the cost of disposal of investments, being the average estimated cost given the actual asset mix of the fund.

(d)      If any adjustment is made to the value of assets and liabilities as set out above other than those permitted by these Rules, the consent of the Commission shall be taken.

12.  Accounts of Unit Linked Funds

(1) Form of Accounts

i.        The regulatory returns to be submitted under Section 46 of the Ordinance shall include, for each fund set up, the following accounting statements:

(a)      Statement of Net Assets

(b)      Statement of Changes in Net Assets

(c)      Statement of Performance Measurement (as per Annexure 3)

ii.       The Statement of Changes in Net Assets shall include the following if these are relevant:–

(a)      Fund Balance Brought Forward from Previous Valuation Date.

(b)      New investments in Fund (value of creation of units in the case of a Unit Linked Fund).

(c)      Investment income earned during the period.

(d)      Gains on disposal of investments (determined as net selling value less cost).

(e)      Increase (decrease) in unrealized gains (losses).

(f)       Redemptions from Fund in the period.

(g)      Taxes accruing/deducted on gains or investment income which are not recoverable.

(h)      Investment Management Charges at Fund level accrued for the period.

(i)       Mortality and Morbidity Charges.

(j)       Fund Balance Carried Forward to Next Valuation Date.

iii.      The Statement of Performance Measurement shall be for the following period:

■        The previous twelve months.

■        The previous five years.

■        The previous ten years.

iv.      The basis of calculation of each performance measure shall be disclosed in any document containing a statement of such measure.

(2) Audit

The Accounts of the funds as required above shall be audited at least once in every financial year by the same auditors auditing the Regulatory Returns. The report of the auditors shall also be deemed to be a part of the Accounts and shall be in such form as may be prescribed by the Commission.

(3)      Circulation to Policy-holders

The Accounts of the Unit Linked Fund shall be placed on the web-site of the life insurer within seven working days of these being submitted to the Commission.

(4)      Summary of Investments

A breakup of asset allocation, sector allocation (for equity) and top 10 holdings in a Unit Linked Fund on the date as at which accounts referred to in sub-Section 13(1) are prepared shall be placed on the web-site of the life insurer.

ANNEXURE 1

Statement Date

STATEMENT OF ACCOUNT

For the period ended December 31,

Policy Number

 

Policyholder Name

 

Date of Birth

 

Current Age

 

Total Policy Term

 

Total Premium paying term

 

Initial Sum Assured

 

Current Sum Assured

 

Annualized Initial Premium

 

Current Premium

 

 

Total Premium

 

 

Riders' Premium

 

 

Basic Premium

 

 

Mode of Premium payment

 

Dynamization Method

 

 

(1) Both premium and sum assured to remain flat

 

 

(2) Only premium to increase by 5% each year

 

 

(3) Both premium and sum assured to increase by 5% each year

 

 

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

Policy period

Account value as at the beginning of the period Units

Basic Premium Allocated during the period (Rs.)

Number of New Units purchased (units)

Mortality Charges deducted (units)

Amount of Partial Withdrawal, if any (Rs.)

Account value as at the end of the period (units) = (2) + (4) – (5) – (6)

Unit value as at the end of the period

Total value of the policy as at the end of the period = (7) * (8)

Amount of Loan, if any (Rs.)

Net value of the policy as at the end of the period = (9) – (10)

1

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

Annexure 2

Insurance Need Analysis of Mr. __________

1. Basic Information Basic Information

Basic Information

Name

 

Address

 

Telephone (Landline/Mobile)

 

E-mail ID

 

Date of birth

 

Marital status

 

State of health

Excellent/Very good/Good/ Moderate/Poor

Smoker

Yes/No

Family Details

Number of dependents

 

Details of dependents

1

2

3

4

5

Name

 

 

 

 

 

Relationship

 

 

 

 

 

Age

 

 

 

 

 

State of Health (Excellent Very Good/Good/Moderate/Poor)

 

 

 

 

 

Occupation

 

 

 

 

 

Income if any

 

 

 

 

 

Whether financially dependent

 

 

 

 

 

Any scope of expansion of family

Yes/No

Employment Details

Occupation

 

Length of service

 

Annual Income

 

Covered under pension scheme?

 

Normal retirement age

 

Financial Details

Value of Savings and Assets

 

Details of Liabilities/ Outstanding Loan

 

Expected Inheritance

 

Pension Details

Employer’s Scheme/Insurance

 

Personal Contribution/Premium

 

Retirement Age

 

Anticipated Value

 

Future Saving Needs

For Education for Children

 

For Wedding

 

For House Purchase

 

Others

 

Existing Life Assurance Plans

Company

Policy No.

Sum Assured

Premium

Start Date

Maturity Date

Purpose

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Priorities and Objectives

What is more important for you? (Please number in order of priority)

Financial Security for family in the event of death

 

Financial Security in the event of Critical Illness

 

Providing Retirement Income

 

Planning for your children’s education

 

Planning for your children’s wedding

 

Building capital through regular saving

 

Investing existing capital for better return

 

Identified Insurance Needs

Life Insurance (Death/Maturity)

 

Desirable Sum Assured

 

Health Insurance

 

Desirable limit of coverage per annum

 

Savings and Investment Planning

 

Desirable returns per annum

 

Pension planning

 

Desirable pension per annum

 

Any Additional Information

 

 

 

 

Recommendation

Life stage

Childhood/Young unmarried/ Young married/ Young married with children/married with older children/post-family or pre-retirement/ retirement

Protection needs

Life & Health/Savings and Investment/Pension

Appetite for risk

Low/Medium/High

Policy recommended, including name of insurer

 

Commitment for the current/ future years

 

Whether all risk elements and details of charges to be incurred and all other obligations have been explained

 

Why you think this policy is most suited prospect

 

                       

Agent’s Certification:

I/We hereby certify that I/we believe that the product/s recommended by me/us above is suitable for the prospect, based on the information submitted by him/her, as recorded above.

(Name and Signature of Agent)                            Dated: ____________