3 August, 2016
IRDAI Issues Guidelines for Corporate Governance for Insurers in India
The Insurance Regulatory and Development Authority of India (‘IRDAI’) has issued guidelines for corporate governance for insurers in India (‘CG Guidelines’) on May 18, 2016, which are applicable from FY 2016-2017. Some salient features of the CG Guidelines are as follows: (i) the board of directors of the insurers (‘BoD’) is required to formulate a policy on related party transactions consistent with the parameters set out in the CG Guidelines; (ii) the BoD is to have a minimum of three independent directors (to be complied with within one year of the effec- tive date of the CG Regulations). An insurer can have two independent directors for the first five years from the grant of registration; (iii) mandatory establishment of certain committees prescribed under the CG Guidelines; (iv) specific guidelines have been prescribed for the ap- pointment and reporting of key management persons and appointment of statutory auditors; and (v) all insurers are required to report status of compliance with the CG Guidelines on an annual basis.
IRDAI (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations, 2016
IRDAI notified the IRDAI (Registration of Indian Insurance Companies) (Seventh Amend- ment) Regulations, 2016 (‘Registration Regulations’) on February 22, 2016. The key change in- troduced is with respect to the manner of calculation of equity capital held by foreign investors3 in an insurance company, which is to be calculated as an aggregate of:
The quantum of equity paid up capital held by foreign investors (including FVCI); and
The proportion of the paid up equity capital held or controlled by such foreign investor either by itself or through its subsidiary companies in an Indian promoter/ investor of such insurance company. This does not apply to Indian promoters/ investors which are banking companies or public financial institutions.
On May 20, 2016, the IRDAI has issued an exposure draft for further amending the Registra- tion Regulations, whereby it has been proposed that item (ii) above will not apply to an Indian promoter/ investor of a listed Indian insurance company regulated by RBI, SEBI or the National Housing Bank.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
