IRDAI (Corporate Governance) Regulations, 2024

Background

The Authority has published IRDAI (Corporate Governance) Regulations, 2024, (Corporate Governance Regulation’) in the Gazette of India bearing F. No. IRDAI/Reg/7/201/2024 on March 20, 2024, with an intent to simplify the regulatory landscape and to reduce the burden of compliance on Insurers. Recognizing and meeting the expectations of all stakeholders and ensuring the adoption of sound and prudent principles and practices for governance is the paramount objective of the Corporate Governance Regulation.

Major highlights of the Corporate Governance Regulation are mentioned hereinunder:

1. Applicability: The Corporate Governance Regulation shall be applicable to the Insurers transacting Life, General, or Health Insurance business in India and shall come into effect from April 1, 2024, which shall remain in force for three years thereafter.

2. Composition of Board: Insurers have been advised to have a Board consisting of competent and qualified individuals with prior experience and qualification in various lines such as Actuarial and underwriting risks, finance, accounting, investment analysis and portfolio management, law, banking securities, and economics, etc. to derive the strategies in a manner that would sustain growth and protect the interest of the all the stakeholders as well as policyholders. Further, Insurers have been advised to take the following measures for the formation of a Board.

a. Ensure the optimum composition of Independent Directors (minimum three Independent Directors) and non-executive Directors shall be in compliance with the Indian Insurance Companies (Foreign Investment) Rules, 2015.

b. The MD/Chief Executive Officer shall be a Whole-time Director of the Board.

c. The Chairperson of the Board shall be appointed with prior approval of the Competent Authority.

d. Independent Director shall fulfil the conditions as specified under the provisions of the Companies Act and/or regulations issued by SEBI (as applicable) and/or as may be specified by the Competent Authority.

e. Maintenance of the fit and proper criteria as specified under applicable regulation, at all times, on a continuous basis.

f. Insurers shall comply with the provisions related to the term, tenure and appointment of the directors mentioned under the Companies Act, 2013.

g. Insurer shall ensure the adequate independence of the Board from the management as well as the promoters.

h. Insurer shall ensure the independence of control functions including compliance, risk, audit, actuarial and secretarial functions.

3. Powers, Roles and Responsibilities of the Board: The Board constituted under Corporate Governance Regulation shall be responsible for the following functions:

a. To formulate the overall strategy and direction for the Insurer, as well as supervise the overall management.

b. To set a clear and transparent policy framework for translation of the corporate objectives.

c. To ensure the formulation and adoption of various policies and strategies by the management.

d. To put in place a robust compliance system for all applicable laws and regulations.

e. To consider various risks involved and their potential impact while framing the policy.

f. To Constitute the following Committee:

i. Risk Management Committee

ii. Policyholder Protection, Grievance Redressal and Claims Monitoring Committee

iii. Investment Committee

iv. With Profits Committee

Insurers have been advised to ensure the constitution of the above-mentioned Committees, appointment and removal of its members, quorum and frequency of meetings, and its functioning shall meet the conditions and restrictions as may be specified by the Competent Authority.

g. To delegate responsibilities to various Committees

h. To adopt proper systems, policies and procedures in order to address potential conflicts of interest.

i. To ensure that Key Managerial Persons shall not hold one position simultaneously.

j. To formulate the policy on related party transactions and disclose it in accordance with relevant provisions of the Companies Act, SEBI Act and rules, regulations, circulars, etc.

k. To ensure continuous compliance with the statutory requirements on capital structure.

l. To evaluate the performance of the members of the Board.

m. To adopt appropriate measures towards succession planning through a process of proper identification and nurturing of individuals for taking up directorship and KMP positions of the Insurer.

n. To carry out effective due diligence with respect to the appointment of Managing Director/Chief Executive Officer or Whole-time Director(s)

o. To oversee the effective implementation of remuneration policy.

p. To monitor the activities under Environmental, Social and Governance Framework.

4 . Appointment of Chief Executive Officer: Insurers have been advised to appoint Managing Director/Chief Executive Officer or Whole-time Director(s), in accordance with the provisions of Section 34A of the Act.

5. Key Managerial Persons (KMPs): The Board shall appoint KMPs based on the recommendation of the Nomination and Remuneration Committee. Further, the appointment of Appointed Actuary shall be in accordance with the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.

6. Appointment, Duties, and Responsibilities of Chief Compliance Officer (CCO): CCO shall be appointed for a minimum fixed tenure of not less than 3 years. CCO shall be responsible for the following duties:

a. Submitting returns, reports and application for necessary approvals.

b. Appraising the Board and senior management on Applicable Acts, Rules, Regulations, Guidelines and Circulars.

c. Ensuring compliance by the Insurer

d. Designing Compliance framework and training on regulatory compliance actions.

e. Ensuring and monitoring compliance with the Corporate Governance Regulation and the Master Circular.

f. Filing a report on the status of compliance with the Corporate Governance Regulation and the Master Circular annually

7. Remuneration to Directors and Key Management Persons (KMPs): Insurers have been advised to formulate and adopt a comprehensive board-approved remuneration policy for the Chairperson, Non-Executive Directors and all the KMPs.

8. Statutory Auditors: Insurers have been advised to appoint a minimum of two auditors as joint statutory auditors and shall ensure there are no conflicts of interest in their appointment.

9. Stewardship: Insurers have been advised to formulate and adopt a comprehensive board-approved Stewardship Policy based on the Master Circular issued under the Corporate Governance Regulation.

10. Environment, Social and Governance: Insurers have been advised to formulate and adopt a comprehensive Board approved Environmental, Social and Governance (ESG) framework which shall be reviewed by the Board annually. The Board shall establish a comprehensive Climate Risk Management Framework to facilitate climate risk management.

A copy of the Corporate Governance Regulation is attached herewith for your reference.

Source category: IRDAI

Attachments

• /2024/368_IRDAI_(Corporate_Governance)_Regulations_.pdf