The IRDAI has issued a circular on “Appointment or Continuation of Common Director(s) u/s 48A of Insurance Act, 1938” dated September 02, 2022 (“ Circular ”), superseding its earlier circular on Appointment of Common/Nominee Director(s) on the Board of Insurance Company, dated August 30, 2018.
Background
The Authority vide the Circular has provided the framework for appointment or continuation of Common Director(s) representing insurance agents, intermediaries and insurance intermediaries on the Board of insurance companies (“ Common Director ”)
Highlights of the Circular are as follows:
The appointment or continuation of the Common Director shall be deemed to have been permitted unless otherwise provided for in the Circular and subject to the following conditions:
- The proposed Director shall not work as “Chief Insurance Executive (CEO)/ Specified Person or any other officer responsible for soliciting insurance business for or on behalf of the insurance agent, intermediary or insurance intermediary while holding the position of the Director in the Insurance Company .
- Such appointment shall not cause any conflict of interest or prejudice the policyholders’ interest.
- Insurers are restricted to pay any remuneration to non-executive directors without prior approval of the IRDAI. However, the insurers are permitted to pay sitting fees the as per applicable norms.
- Disclosure norms under applicable laws are required to be complied with, including requirements under the Corporate Governance Guidelines and the IRDA (Preparation of Financial Statement and Auditor’s Report of Insurance Companies) Regulations 2002.
- A resolution approving the appointment of the Common Director passed by the Board of insurers/agent/intermediary/insurance intermediary shall be required.
- The Common Director shall not take part in any discussion or voting pertaining to following:
- Any area having “potential conflict of interest”;
- Insurer/agent/intermediary/insurance intermediary where he/she is holding common directorship”.
- The number of directorship held by the Common Director shall not exceed maximum directorships specified under the extant law including the Companies Act 2013.
- Insurers/agent/intermediary/insurance intermediary are required to comply with all other applicable laws.
It is also clarified that an individual cannot be appointed as the Common/Nominee Director if he/she is already acting or proposed to act as Executive Director/Whole-Time Director on the Board of insurers/agent/intermediary/insurance intermediary.
It shall be ensured that the Common Director may be appointed as Chairperson on the Board of insurance company/agent/intermediary/insurance intermediary provided there are necessary safeguards, to protect policyholders’ interest and to prevent any conflict of interest that may arise from such appointment are in place.
Insurers shall file a yearly certificate duly certified by the CEO, confirming compliance with the Circular not later than April 30 of the succeeding financial year to IRDAI.
Source category: IRDAI
Attachments
- /2022/82_APPOIN~1.PDF
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