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Important changes which will allow life insurance companies to invest in a wider range of unit-linked assets will come into effect next month.
The current Financial Services Authority (FSA) 'Permitted Links' rules, which govern which assets the £730 billion unit-linked insurance sector can invest in, have been in place since 1994 and were in need of updating to reflect market changes over that time. Dan Waters, FSA Director Retail Policy and Asset Management Sector Leader, said:
“We have taken the opportunity to move away where possible from detailed rules and replace them with a set of more principles-based high level rules. This is a practical expression of how the FSA is moving towards more principles-based regulation and will give the firms affected greater flexibility in investing whilst maintaining an appropriate level of consumer protection.”
The new rules reflect changes in recent years in the way investment markets operate. For example, there are changes to the way land and property is defined and can be held and a new category of 'institutional policyholder' has been created.
The new rules come into effect on 6 October and fulfil a commitment in the FSA Business Plan 2006/07 to review the Permitted Links rules. Consultation was carried out earlier this year and a Policy Statement issued today sets out the rule changes.
