The Insurance Regulatory and Development Authority of India (IRDAI) has come out with a master circular to provide various operational and procedural aspects to be adopted by all insurers.
Among other things, the insurance sector watchdog asked insurance companies to seek prior approval for the appointment of their board chairperson, effective immediately.
Existing chairpersons have been given until March 31, 2026, or the end of their current terms, whichever comes first, to comply with the new norm.
A master circular titled "Master Circular on Corporate Governance for Insurers, 2024" shall apply to all insurers except foreign companies engaged in re-insurance business through a branch established in India.
The circular becomes effective upon issuance. However, insurers are given time up to June 30, 2024, to ensure compliance with its provisions. Further, where specific timelines are specified for certain compliances, such timelines shall remain the same.
This new framework aims to strengthen the capacity of key stakeholders responsible for the insurer's governance, such as the board, senior management, and key persons in control functions, to effectively and prudently manage the insurer's business.
According to the new framework, insurers shall ensure an optimum composition of independent directors and nonexecutive directors, subject to a minimum of three independent directors.
The quorum for the board meetings shall be one-third of the total strength of the board or three directors, whichever is higher.
"The insurer shall ensure that the board comprises competent and qualified directors to drive the strategies in a manner that would sustain growth and protect the interests of stakeholders in general and policyholders in particular," it read.
Insurers shall put in place a "whistle-blower" policy where employees would be able to raise concerns internally about possible irregularities, governance weaknesses, financial reporting issues, or other such matters. The issues could include employees reporting in confidence directly to the Chairperson of the Board, a Committee of the Board, or the Statutory Auditor.
