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Corporate Governance for Insurers: Procedural Aspects Delineated

The Insurance Regulatory and Development Authority of India (IRDAI) has delineated, vide a master circular, the procedural aspects relating to the corporate governance requirements for insurers which were earlier laid down through regulations. Insurers have time till June 30, 2024, to comply with the provisions of the new master circular.

While the IRDAI (Corporate Governance for Insurers) Regulations, 2024, notified two months back, provided an outline of governance requirements to be adhered to by insurers, the master circular presents the operational framework. For instance, the regulations state that the directors have to continually meet the “fit and proper” criteria and these criteria are specified under the master circular. Further, the master circular lists the responsibilities of the mandatory committees including the Audit Committee, the Investment Committee, the Risk Management Committee, the Policyholder Protection, Grievance Redressal and Claims Monitoring Committee (PPGR & CM Committee), the Nomination and Remuneration Committee (NRC), the Corporate Social Responsibility Committee (CSR Committee) and With Profits Committee. However, the constitution of a With Profits Committee is mandatory only for insurers transacting life insurance business. Insurers are free to constitute an Ethics Committee which was incidentally not envisaged under the regulations.

Concerning the appointment of the Chairperson of the Board, prior approval of the Competent Authority has to be taken after submission of Forms A, B and C as included in Annexure 1 to the master circular. Such prior approval is not required in the case of public sector insurers or insurers where the appointment of Chairperson is governed by the specific Acts, Rules, Regulations or instructions of the Government of India.

As per provisions regarding remuneration contained in clause 9 of the master circular, the total remuneration for each non-executive director must not be more than Rs.30 Lakhs per annum. It is clarified that the provisions under said clause apply to private-sector insurers only.

Insurers are also mandated to have a whistle-blower policy covering important aspects such as a robust anti-retaliation policy, briefing of the board of directors, etc. Additionally, the stewardship policy to be formulated as per Chapter V of the 2024 Regulations must be based on the seven principles enumerated under the master circular.