IRDAI today came out with draft norms to align corporate governance for insurance sector with the new Companies Act, which among other things, lay stress on ‘fit and proper’ criteria for selection of board of directors and setting up various committees for better companies.
The Insurance Regulatory and Development Authority of India (IRDAI) had earlier set up a Working Group on Harmonisation of the Corporate Governance Guidelines for Insurance Companies with the Companies Act, 2013.
“The proposed framework for corporate governance for insurance companies is intended to be comprehensive, incorporating structure and composition of the Boards of Insurers, Committees of the Board… appointment of MD/CEO, Directors and Key Management Persons (KMPs), appointment of Auditors, Reporting and Disclosures,” the regulator said.
In line with the international and domestic norms, the Directors of insurance companies have to meet the “fit and proper” criteria, the draft said, on which comments have been sought till February 26.
“The criteria to be satisfied, at a minimum, would relate to integrity demonstrated in personal behaviour and business conduct, soundness of judgment and financial soundness,” it added.
Currently, the fit and proper requirements seek to ensure that the Director should not have been convicted or come under adverse notice of the laws and regulations involving moral turpitude or of any professional body.
“With a view to ensuring that the Directors comply with the above requirement, a due diligence enquiry should be undertaken on the person to be appointed as Director…,” the draft said.
The exposure draft further proposes that insurers should mandatorily set up of audit committee, investment committee, risk management committee, liability asset management committee, policyholder protection committee, nomination and remuneration committee (mandatory), and CSR committee.
IRDAI said the emergence of insurance companies as a part of financial conglomerates has added a further dimension to sound corporate governance with emphasis on overall risk management and to prevent any contagion and to ensure financial stability.
It has outlined in general terms, governance responsibilities of the Board in the management of the insurance functions under various regulations notified by it covering different operational areas.
The regulator said it has now been decided to put them together and to issue the comprehensive guidelines.
The draft ‘Corporate Governance Guidelines for Insurance Companies’ has been proposed in the light of changes brought in by the Companies Act, 2013.