The Financial Services Authority (FSA) will conduct a review into the £800bn unit-linked fund sector.
In the regulator's Retail Conduct Risk Outlook 2012, it identified the governance of unit-linked funds by life insurers as an emerging risk.
The FSA expects the funds under management in the unit-linked sector to grow significantly with the introduction of pension auto-enrolment.
In its latest insurance conduct supervision newsletter, the FSA said that due to the size and importance of this sector, any failures pose a "high risk" to
the FSA's statutory objectives, particularly the protection of consumers.
The regulator's review will assess whether firms have adequate systems and
controls in place to ensure that funds are administered and managed fairly and in accordance with customer expectations.
It will also look into whether assets backing unit-linked policies are appropriate for policyholders, and that policyholder benefits are calculated fairly and accurately.
The FSA said it will aim to share the results of the review in the autumn.
Championing diversity in the workplace
Our weekly heads-up for advisers