The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurance companies to seek prior approval for the appointment of their Board Chairperson, effective immediately. Existing Chairperson have been given until March 31, 2026, or the end of their current terms, whichever comes first, to comply with the new regulations.

 “The proposal for appointment of chairperson of the board shall be submitted for prior approval of the competent authority,” IRDAI said. “Chairperson of the insurer as on date of issue of this circular is permitted to continue as chairperson up to March 31, 2026 or till he or she completes his or her current tenure, whichever is earlier.”

Under these new corporate governance rules, IRDAI has prohibited conflicts of interest in key management positions. Also, the holding of both business and control functions by a single key management person or the holding of two or more control positions by one individual is now forbidden.

Previously, no such approvals were required for appointing Chairman. This shift towards "principle based regulations" is to ensure thorough due diligence at both the Board Chairman and CEO levels, according to an insurance executive.

These changes are in line with similar norms issued by the Reserve Bank of India (RBI) for the banking sector.

The Economic Times – 22nd May 2024

(The writer is Shilpy Sinha.)