To provide various operational and procedural aspects to be adopted by all insurance companies, the Insurance Regulatory and Development Authority of India (IRDAI) has released a master circular.
The master circular titled “Master Circular on Corporate Governance for Insurers, 2024” shall apply to all the insurers, with the exception of foreign companies that are involved in reinsurance business through an established branch in India.
IRDAI has asked insurers to seek prior approval for their board chairperson’s appointment, with immediate effect.
To comply with the new norm, the existing chairpersons have been given time until March 31, 2026, or the end of their current terms, whichever comes first.
The circular becomes effective upon issuance. However, to ensure compliance with its provisions, insurance companies are given time up to 30th June, 2024. Further, such timelines shall remain the same where specific timelines are prescribed for certain compliances.
The insurance companies shall ensure an optimum composition of independent directors and non-executive directors, subject to a minimum of 3 independent directors, according to the new framework.
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Source: IRDAI
The minimum members for the board meetings shall be one-third of the board’s total strength or three directors, whichever is higher.
The master circular read, “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.”
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Insurance businesses must implement a “whistle-blower” policy that enables employees to voice concerns internally about potential irregularities, governance flaws, problems with financial reporting, and other pertinent issues.