IRDAI’s Regulatory Update for Enhanced Corporate Governance in the Insurance Sector
On March 21, 2024, the Insurance Regulatory and Development Authority of India (IRDAI) notified new corporate governance regulations under the title “The Insurance Regulatory and Development Authority of India (Corporate Governance for Insurers) Regulations, 2024.” These regulations are encapsulated in a Master Circular titled “Master Circular on Corporate Governance for Insurers, 2024,” leveraging IRDAI’s authority under multiple legislative frameworks.
Implementation and Applicability
- Effective Date: The regulations took effect immediately upon issuance, with insurers granted until June 30, 2024, to fully comply with the provisions.
- Scope: The circular applies to all insurers except foreign companies conducting reinsurance business through branches in India.
Key Features of the New Regulations
- Board Chairperson Approval: Insurers are now required to obtain prior approval for the appointment of their Board Chairpersons. Current chairpersons have until March 31, 2026, or the end of their current terms, whichever is earlier, to meet these new requirements.
- Board Composition: There is a new mandate for an optimum mix of Independent Directors and Non-Executive Directors on the boards, with a minimum requirement of three Independent Directors.
- Board Meetings: Meetings of the Board of Directors can only be conducted with a quorum of either one-third of the total board strength or three directors, whichever is higher.
- Women Directors: In alignment with Section 149 of the Companies Act, 2013, at least one woman director must be present on the board of every insurance company.
- Whistle-Blower Policy: Insurers must implement a whistle-blower policy to facilitate internal reporting of irregularities, governance concerns, or issues related to financial reporting. Employees can report these issues confidentially directly to the chairperson of the Board, a Committee of the Board, or the Statutory Auditor.
Exceptions and Special Provisions
- Exemptions: Insurers governed by specific acts, rules, regulations, or instructions from the Government of India regarding the appointment of a chairperson are exempt from needing prior approval from the competent authority.
These updated regulations are part of IRDAI’s efforts to bolster corporate governance in the insurance sector, ensuring that companies operate with enhanced transparency and accountability, thereby protecting the interests of stakeholders and promoting a healthier regulatory environment.
Login with Google