Insurers may need prior approval from IRDAI to appoint new chief

Indian insurers may soon require insurance watchdog's prior approval to appoint a chairman, a practice followed in the banking sector, as part of measures being considered to improve governance, people familiar with the development told ET.

The Insurance Regulatory and Development Authority of India (IRDAI) is eyeing a revamp of the governance norms for insurance companies aimed at strengthening corporate governance as also simplifying compliances.

At present, no approval is required from the regulator to appoint a board's chairman.


Discussions were held with all stakeholders at the Bima Manthan event organised by the regulator earlier this month, said an official, adding that these are preliminary discussions and, in some cases, the regulator has already sought views from all stakeholders.

An email sent to IRDAI did not elicit any response till press time.

"The focus is on reducing unnecessary compliance measures, but the regulator also wants insurers to further strengthen corporate governance norms and policyholder protection policies, including a more robust grievance redressal and claim management system," he added.

Another proposal being examined is to make an Asset-Liability and Ethics Committee at the board level mandatory and exempt insurers from the requirement of a prior approval from IRDAI before approaching the market regulator, Securities and Exchange Board of India for listing, said another official.

The regulator is also considering mandating a board-approved Environmental, Social and Governance (ESG), and Climate Risk Framework. "These changes aim to reduce the compliance burden on insurers, update them with changing dynamics in the sector, and further strengthen corporate governance norms," the official said. ESG norms are not explicitly addressed in existing corporate governance guidelines.

The regulator is also discussing with stakeholders a possible relaxation of the lock-in period for insurers in cases of amalgamation or to address distressed financial situations.

Under existing regulations, equity shares of the company on the date of the grant of a Certificate of Registration remain locked-in for different periods, with the regulator only providing exemption in cases of listing. "Another suggestion is that directors nominated by both promoters and investors should not be on the board of any other insurer in the same line of business," the official said.

Discussions were also held about addressing the challenges in the Bancassurance space. In October 2023, the IRDAI had set up a task force to review the existing banking intermediation model and carry out modifications in the regulatory framework.