2016 Guidelines for Corporate Governance of Indian Insurance Companies

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the
guidelines related to the Corporate Governance for Indian Insures or Insurance Companies. On 18 th May
2016. The main objective behind the introduction of these guidelines is to make necessary changes and
modification in the policies of insurance sector and also to provide appropriate corporate governance
regime to Indian Insurers. Earlier, IRDAI Introduces 2009 Guidelines regarding the corporate governance
of Indian insurers but those guidelines was not so effective. Due to this reason, IRDAI had introduced 2016
guidelines to replace the 2009 guidelines.
The 2016 guidelines not only replaces the 2009 guidelines but also replaces the guidelines related to
the reporting of key persons of 9 th October 2013 and stipulations regarding the appointment of statutory
directors who are issued through the circulars of 25 th July 2005 and 22nd April 2009. The aim of 2016
guidelines is to provide a system of control where Indian insurers or insurance companies are required to
follow the norms set by the 2016 guidelines regarding the appointment of key managerial persons like
statutory auditors and board of directors these functions and constitutions.
Features of 2016 Guidelines
The key characteristics and features of 2016 guidelines issued by IRDAI are as follows,
1. Appointment of Directors
According to 2016 guidelines, these should be a mandatory appointment of independent directors
and a women director as a board of director of Indian insurance company with reference to the section 149
of companies act. The independent directors of the insurance company are responsible to evaluate the
performance of board of insurance company in accordance with the applicable provisions of companies act.
2. Prevention of Conflict of Interest
The 2016 guidelines has issued certain norms to prevent the conflict of interest and added
compulsory obligation for the insurance companies that they should comply with the provisions in
accordance to related party transactions stated under section 188 of companies act.
3. Disclosure of Transaction
The 2016 guidelines states that, every insurance company should disclose the transactions related to
the party and remuneration of key persons in the annual accounts in accordance with the provisions of
companies act. Companies which are dealing in life insurance business should disclose such information
with respect to persistency ratio.
4. Corporate Social Responsibility
According to 2016 guidelines, insurers or insurance companies are required constitute corporate
social responsibility as prescribed in the provisions of companies act for performing their functions.
OR
4. Corporate Social Responsibility
According to 2016 guidelines, insurance companies can perform their functions after constituting
corporate social responsibility as per the provisions of companies act 2013.