IRDAI has fixed the maximum age limit for non-executive directors including the chairperson of the board at 75 years and after attaining the age of 75 years no person shall continue on the board of the insurer
Hyderabad:
Insurance regulator IRDAI on Friday said the post of managing director or whole time director in an insurance company cannot be held by the same person for continuous period of 15 years and also put an age limit of 70 years for these posts.
Within 15 years, after cooling off period of one year, the individual is eligible for re-appointment, said the IRDAI unveiling its the new norms on remuneration of directors and key managerial persons((KMP)) of private sector re/insurers other than foreign reinsurance branches(FRBs)
If the MD & CEO is appointed by a promoter/major shareholder, then he/she shall not hold the said posts for a continuous period of 12 years. However, the IRDAI with sufficient justification can extent it to 15 years.
A promoter/shareholder cannot hold a whole time position in the insurer. However, this condition is not applicable in case where an employee becomes a shareholder by virtue of shares received through ESOPs during the course of employment.
Further, for each non-executive director or independent, total remuneration should not exceed Rs 20 lakh per annum.
If the chairperson of the company is a non-executive director, the remuneration may be decided by the board of directors of the insurer and remuneration policy should specify the details of the remuneration and incentives to be paid to him/her, said the insurance regulator.
Further, the independent directors will not be eligible for any equity-linked benefits.
The norm will be applicable for remuneration payble to non-executive director of private sector insurers from fy 23-24.
The IRDAI has fixed the maximum age limit for non-executive directors including the chairperson of the board at 75 years and after attaining the age of 75 years no person can continue on the board of the insurer.
Where the chairperson/non-executive director has already attained the age of 75 years as on the issue of these norms, such insurers have to appoint new incumbent in place of such chairperson/non-executive director within a period of one year.
Independent directors can be appointed for a term of five consecutive years and can be eligible for reappointment on passing of special resolution by the insurer.
No independent director should hold office for more than two consecutive terms , beyond a period of 10 years.
After completion of 10 years such independent director shall be eligible for reappointment only after a cooling off period of at least three years.
If a director has already completed a perio0fd of 10 years on the date of issue of these norms, such insurers has to appoint new incumbent in place of such directors within a period of one year.
Insurers have to disclose the amount of remuneration paid to each non-executive independent directors.
Key managerial persons
Insurers can’t offer guaranteed bonuses to Key managerial persons as part of remuneration plans as they are inconsistent with sound risk management
Joining /sign on bonus shall only occur in the context of hiring new personnel and be limited to the first year of employment. Such bonus will neither be considered as part fixed pay nor as a part of variable pay.
KMPs of insurers can’t be be issued any sweat equity shares.
Insurers can’t grant severance pay, excluding the notice period pay, other than accrued benefits like gratuity pension to KMPs except in cases where it is mandatory under any applicable provision of the statues.
The insurers have put in place a set of guidelines for KMPs within 3 months of these new norms.
In view of the increased demands on non-executive directors’ participation in board and committee meetings and higher responsibilities they are expected to bear in the interest of higher level of excellence in corporate governance and in order to enable insurance companies to attract and retain professional non-executive directors, it is essential that such are directors appropriately compensated, said the IRDAI.
The new rules will replace and supersede all the existing norms which have been in force since 2016, said the IRDAI.
The insurers have to complete the process of framing the new remuneration policy based on the new norms within three months.
Some of the minimum parameters that will be taken into account for determination of performance assessment of all KMPs, constituting 60 per cent of total weightage, for payment of variable pay or incentives are: Overall financial soundness such as net-worth position, solvency, growth in AUM, net profit, compliance with Expenses of Management Regulations, claim efficient in terms of settlement and outstanding, improvement in grievance redressal status.
The IRDAI has asked the insurers to ensure that variable pay should be at least 50 per cent of the fixed pay and should exceed 300 per cent of the fixed pay.
Where variable pay is upto 200 per cent of the fixed pay, a minimum of 50 per cent of the variable pay should paid via non-cash instruments. The same limit would be 70 per cent, in case variable pay is above 200 per cent of the fixed pay.
A minimum of 50 per cent of the total variable pay must invariably be under deferral arrangement and the deferral period has to be a minimum of three years. The first such vesting should accrue after one year from the commencement of the deferral period.