Page 59 - Insurance Times August New 2023

Circular

IRDAI Corner

Guidelines on Remuneration of Directors respect to the total remuneration of Directors and
KMPs, Variable Pay Deferral, Malus and Clawback
and Key Managerial Persons of Insurers
provisions, Accounting, Disclosures, etc., and
30.06.2023
c. issue revised guidelines on remuneration of direc-
tors and key managerial persons of insurers.
A. Background:
i. The Authority issued the following guidelines on Remu- B. General:
neration of Non-Executive Directors and Managing Di- i. Sound remuneration policy and practices are part of the
rector / Chief Executive Officer / Whole-time Directors corporate governance framework of an insurer. These
of Insurers vide Circular Ref: IRDA/F&A/GDULSTD/155/ guidelines are neither intended to unduly restrict nor
0812016 on 51h August, 2016: reduce an insurer's ability to attract and retain skilled
talent by prescribing any particular form or level of in-
a. Insurance Regulatory and Development Authority
dividual remuneration. Rather, they aim to promote the
of India (Remuneration of Non-Executive Directors
alignment of remuneration policies with the long term
of Private Sector Insurers) Guidelines, 2016
interests of insurers to avoid excessive risk taking,
b. Insurance Regulatory and Development Authority
thereby promoting sound overall governance of insur-
of India (Remuneration of Chief Executive Officer /
ers and fair treatment of customers.
Whole-time Director / Managing Director of Insur-
ii. The Insurer's Board should adopt and oversee the ef-
ers) Guidelines, 2016
fective implementation of written remuneration policy
ii. The guidelines which came into effect from 1St Octo-
which does not induce excessive or inappropriate risk
ber, 2016 provide the framework for remuneration of
taking, is in line with the corporate culture, objectives,
Non-Executive Directors and CEONVTD/MD of private
strategies, identified risk appetite and long term inter-
sector insurers and were issued on the set of principles
ests of the insurer and has proper regard to the inter-
brought out by the Financial Stability Board (FSB), rec-
ests of its policyholders and other stakeholders. The
ommendations of International Association of Insurance
Insurer's Board should ensure that such a remuneration
Supervisors (IAIS), G-20 Nations Forum and Basel Com-
policy, at least, covers those individuals who are mem-
mittee on Banking Supervision (BOBS).
bers of the Board, Senior Management, Key Persons in
iii. The guidelines have been in force for over 6 years and Control Functions and other employees whose actions
based on the experience of implementation and com- may have a material impact on the risk exposure of the
pliance of guidelines by the insurers, it has been decided insurer and should not encourage such individuals, to
to: take inappropriate or excessive risks, especially where
a. bring remuneration of Key Managerial Persons performance-based variable remuneration is used.
(KMPs) other than the CEO also within the ambit
iii. Further, the potential for conflicts of interests that may
of the guidelines,
compromise the integrity and objectivity of the staff in-
b. give more clarity to the extent of variable pay with volved in control functions should also be managed. This
The Insurance Times August 2023 51