Business

Fresh norms on insurance firm directors pay mooted

Insurance regulator IRDAI has issued an exposure draft proposing changes to guidelines on remuneration of non-executive directors as well as MD/CEO/whole-time directors of insurance companies.

The proposal, to replace the existing, 2016 guidelines is “to ensure sound remuneration or compensation practices and [to] avoid situations resulting from excessive risk taking behaviour due to inappropriate compensation structures or incentive plans,” the regulator said.

For wholetime directors, CEOs and MDs, the remuneration structure, under the draft, is proposed to be divided between fixed pay, perquisites and variable pay. “The fixed pay should be reasonable and all the fixed items, including perquisites, shall be treated as part of fixed pay,” the document said. It has also fixed limits for variable pay.

The remuneration guidelines also provide the broad principles for remuneration of risk control and compliance staff which are broadly in lines with RBI stipulations. The tenure of MD and CEO and WTDs has also been aligned with the RBI’s stipulation in this regard, the regulator said.

For non-executive directors, apart from sitting fee and other expenses, the draft mooted a fixed remuneration that is commensurate with an individual director’s responsibilities and demands on time, which are considered sufficient to attract qualified competent individuals. Such remuneration, however, should not exceed ₹20 lakh per annum for each such director, excluding Chairman. For the Chairman of the Board, the remuneration may be decided by the Board of Directors of the respective company.

The non-executive directors will not be eligible for ESOPs and prior approval of IRDAI should be required for any allotment of sweat equity to them. The maximum age and numbers of years which a person can serve as non-executive directors, including as Chairman, has been aligned with the guidelines issued by RBI.

The upper age limit, including for the Chair of the board, will be 75 years and after attaining the age of 75 years no person can continue in the said position. The tenure of a non-executive director, continuously or otherwise, on the board of an insurer, should not exceed eight years. After completion of eight years, the person may be considered for re-appointment only after a minimum gap of three years, the draft document said.


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Printable version | May 17, 2022 6:43:53 pm | https://www.thehindu.com/business/fresh-norms-on-insurance-firm-directors-pay-mooted/article38102754.ece