The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new corporate governance regulations for insurers. These new corporate governance regulations were notified on 21st March, 2024 under The Insurance Regulatory and Development Authority of India (Corporate Governance for Insurers) Regulations, 2024 (“the Regulations”).
- IRDAI in exercise of his powers given under Section 34 of the Insurance Act, 1938, Section 14 of the IRDAI Act, 1999 and Regulation 12 of the Insurance Regulatory and Development Authority of India (Corporate Governance for Insurers) Regulations, 2024 (“the Regulations”) issued these new governance regulations through a Master circular titled “Master Circular on Corporate Governance for insurers, 2024”
Implementation:
i.These new regulations issued through this Master Circular become effective upon issuance. However, insurers are given time up to 30th June, 2024, to ensure compliance with its provisions. Moreover, where particular timelines are specified for certain compliances, such timelines shall remain the same.
ii.This Master Circular will be applicable to all insurers except foreign companies engaged in re-insurance business through a branch established in India.
Key Features:
i.Now, it will be mandatory for insurance companies to seek prior approval for their Board Chairperson appointments, with immediate effect.
ii.Existing chairpersons have been given time until 31st March, 2026 or the end of their current terms, whichever comes first, to comply with the new norms.
- In case of insurers, where the appointment of chairperson is governed by the specific acts or rules or regulations or instructions of the Government of India (GoI), such insurers do not require prior of the competent authority.
iii.Insurers is now mandated to ensure an optimum composition of Independent Directors and Non-Executive Directors in the Board of Directors, subject to minimum of 3 Independent Directors.
iv.Board of Meetings will be conducted only when the quorum is maintained i.e. 1/3rd of the total strength of the Board or 3 Directors, whichever is higher.
v.There shall be at least 1 women Director on the Board of every insurance company as required under Section 149 of the Companies Act, 2013.
vi.Insurers shall put in place a “whistle-blower policy”, where employees would be able to raise their concerns at company internal forum regarding possible irregularities, governance, financial reporting, among others.
- These could include employee reporting in confidence directly to the chairperson of the Board or Committee of the Board or Statutory Auditor.
IRDAI Introduced Flexibility in Procedural Norms on Expense of Management, Share Transfer
The Insurance Regulatory and Development Authority of India (IRDAI) relaxed procedural norms on expense of management and share transfer through two separate Master Circulars issued on 15th May, 2024.
Master Circular on Expenses of Management (EOM) and Commission Regulations 2024
IRDAI gives relaxation for Expense Of Management (EOM) under IRDA (Expenses of Management, including Commission, of Insurers) Regulations 2024 through Master Circular titled “Master Circular on Expenses of Management (EOM) and Commission Regulations 2024”.
- It is applicable to life, general and health insurers and shall come into force from the date of issuance.
Key Points:
i.The commission structure shall be reasonable and not result in excessive compensation for intermediaries at the expenses of customers or the insurers.
ii.It has eliminated the requirement for the Board of Insurance companies to specify ceilings based on the absolute amount of commission in segments like: group insurance.
iii.The new commission structure shall not apply to already sold policies as it will ensure that the existing policyholders and their contracts remain unaffected by the changes.
Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation, of Insurers, 2024
IRDAI gives relaxation for transfer of shares under IRDA (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations 2024 through Master Circular titled “Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation, of Insurers, 2024”.
Key Points:
i.Through new norm, IRDAI has simplified the application procedures, Employee Stock Option Plans (ESOPs) compliance and share transfer.
ii.It has specified timelines for prior approval for listings, amalgamation guidelines, reporting for capital forms etc.
About Insurance Regulatory and Development Authority of India (IRDAI):
IRDAI was constituted in 1999 and was incorporated as a statutory body in April 2000
Chairperson– Debasish Panda
Headquarters-Hyderabad, Telangana
