Regulator issues guidelines on remuneration of directors and key managers of insurers

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The IRDAI has issued guidelines on the remuneration of directors and key managerial persons of insurers.

These guidelines, in effect from the current financial year ending 31 March 2024, aim to promote effective governance of compensation, alignment with prudent risk-taking, supervisory oversight, and the protection of policyholders’ interests.

They replace the previous guidelines issued in 2016 that covered the remuneration of non-executive directors and managing director / CEO/ whole-time directors of private-sector insurers. They provide more clarity on variable pay, deferral, clawback provisions, accounting, disclosures, etc.

The guidelines emphasise the importance of sound remuneration policies in the corporate governance framework of insurers. They aim to align remuneration policies with the long-term interests of insurers, prevent excessive risk-taking, and ensure fair treatment of customers. The insurer’s board is responsible for adopting and implementing a written remuneration policy that considers the insurer’s objectives, risk appetite, and the interests of policyholders and stakeholders. The guidelines also address the management of conflicts of interest and the remuneration of staff involved in control functions.

The IRDAI said in a statement issued on 30 June 2023 that the 2016 guidelines had been in force for over six years and based on the experience of implementation and compliance of guidelines by the insurers, it has been decided to:

a. bring the remuneration of Key Managerial Persons (KMPs) other than the CEO also within the ambit of the guidelines,

b. give more clarity to the extent of variable pay with respect to the total remuneration of directors and KMPs, variable pay deferral, malus and clawback provisions, Accounting, Disclosures, etc, and

c. issue revised guidelines on the remuneration of directors and key managerial persons of insurers.

The primary objective of issuing the new guidelines are as follows:

  1. To ensure effective governance of compensation
  2. To ensure alignment of compensation with prudent risk-taking
  3. To ensure effective supervisory oversight and stakeholder engagement
  4. To ensure the safety of the interests of policyholders and other stakeholders.

The new guidelines are not applicable to foreign reinsurance branches operating in India.



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