The master circular applies to all insurers except foreign companies engaged in the re-insurance business through a brand established in India.
The Insurance Regulatory and Development Authority of India (Irdai) now requires insurance companies to get approval for the appointment of their Board Chairperson, with immediate effect. Current Chairpersons must comply with this rule by March 31, 2026, or the end of their current terms, whichever comes first, to comply with the new regulations, according to an Irdai circular issued on May 22.
Under the new corporate governance rules, Irdai has prohibited conflicts of interest in key management positions. Moreover, one person can no longer hold both business and control functions or hold multiple control positions at the same time.
“The proposal for appointment of the Chairperson of the board shall be submitted for prior approval of the competent authority. Chairperson of the insurer as on date of issue of this circular is permitted to continue as chairperson up to March 31, 2026, or till he or she completes his or her current tenure, whichever is earlier,” says Irdai circular.
According to the circular, the insurers are given time up to 30th June 2024 to ensure compliance with its provisions. The insurer shall ensure an optimum composition of independent directors and non-executive directors, subject to a minimum of three independent directors. The maximum age limit for non-executive directors, including the Chairperson of the board, shall be 75 years and after attaining the age of 75 years no person shall continue on the board of an insurer. Every Insurer shall constitute an Audit Committee as per Section 177 of the Companies Act, as amended from time to time, including in relation to its composition.
According to the circular, the board of every insurer shall set up an investment committee comprising of at least two non-executive directors, the Chief Executive Officer, the Chief Financial Officer, Chief Investment Officer, Chief Risk Officer, and the Appointed Actuary. Each insurer shall set up a policyholder protection, grievance redressal, and claims monitoring committee (PPGR&CM) committee. The committee shall ensure compliance with the relevant regulations/guidelines/circulars in this regard to protect the interest of the policyholders.
According to the circular, the insurers shall comply with the framework of the With-Profit Fund Management and Asset Share Calculations specified by the authority. Every Insurer transacting life insurance business shall constitute a With-Profits Committee comprising of an independent director, CEO, CFO, appointed actuary, and an independent actuary. The insurer may add more experts with expertise in the areas of actuarial, finance, investment, or any other relevant domain in the With-Profits Committee. Functions of the With-Profits Committee shall be in accordance with the provisions of the master circular on actuarial, finance, and investment functions of Insurers.
Says Rakesh Jain, CEO, Reliance General Insurance: “The master circular explains complete governance responsibilities or insurers’ boards. The circular says that boards must oversee management, stopping excessive centralization of decision-making. It must also ensure flexibility, transparency, and timely decision-making within the organization. It mentions board composition, including a minimum number of independent directors, and stresses the significance of directors having the much-needed knowledge and skills to manage the insurer’s business carefully.”