3 min readMumbaiMay 26, 2024 04:23 AM IST
First published on: May 26, 2024 at 04:23 AM IST
The Insurance Regulatory and Development Authority (Irdai) has directed insurance companies to take prior approval for the appointment of board chairperson.
The regulator said the present board chairperson can continue up to March 31, 2026 or till they complete their current tenure. To promote checks and balances, it is good practice for the chair of the board to be a non-executive board member and not serve as chair of any board committee, Irdai added.
In a master circular on corporate governance for insurers, issued on May 22, Irdai said the board in consultation with the key management persons need to ensure that the overall direction of the business of the insurance company, policies and strategies should shape the level of risk adoption, standards of business conduct and ethical behaviour of the insurer at the macro level. “While laying down the projections, the Board must address the expectations of the shareholders and the policyholders,” the guidelines said.
It said that the chief executive officer should be responsible for the conduct of the insurer’s affairs in a manner which is not detrimental to the interests of policyholders.
The board of the insurance companies should monitor and manage potential conflicts of interest of policyholders, management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions. They should also ensure fair treatment of policyholders and employees.
The insurer should also ensure independence of control functions including compliance, risk, audit, actuarial and secretarial function, it said.
For insurers within a group, appropriate and effective group-wide risk control systems need to be adopted in addition to the control systems at the level of the insurer.
“In the case of insurance cover given by the insurer to its group companies, price/ premium quoted by the insurers under the applicable product filing regulations/ circular should be considered at arm’s length,” the guidelines said.
The Irdai said that the board of every insurer should set up an Investment Committee comprising at least two Non-Executive Directors, the Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, Chief Risk Officer and the Appointed Actuary. The audit committee of insurers should be directly responsible for the recommendation of the appointment, remuneration, performance and oversight of the work of the auditors.
Commenting on the guidelines, Nangia & Co LLP’s Partner -Audit & Assurance, Jaspreet Bedi, said that the new corporate governance guidelines address the allocation and regulation of power and accountabilities within an insurer and avoids undue concentration of authority and power.
“The auditor refresh policy is to promote independence, impartiality, and integrity in the audit process. It enhances transparency and accountability by introducing new auditors at regular intervals of four years, preventing complacency, and maintaining rigorous financial reporting standards,” Bedi said.
The master circular is applicable to all insurers except foreign company engaged in re-insurance business through a branch established in India. Irdai has given insurers time up to June 30, 2024 to ensure compliance with the provisions.
Irdai has given insurers time up to June 30, 2024 to ensure compliance with the provisions. (Representational Image) 
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