Regulatory updates

The Insurance Regulatory and Development Authority of India (IRDAI), vide a circular dated 2 September 2022 (2 September circular) had issued a framework for appointment of common director(s) on the board of an insurance company. One of the conditions that had been prescribed for the appointment or continuation of common director(s) was regarding the payment of remuneration to non-executive directors. The 2 September 2022 circular stated that insurers should not pay any remuneration to non-executive directors without prior approval of the IRDAI.
However, sitting fees could be paid as per the applicable norms.

In order to further simplify the process for appointment/continuation of common director(s), IRDAI, vide a circular dated 30 January 2023 (30 January circular) has specified certain conditions subject to which the insurers would be permitted to pay profit related commission to the non-executive director(s). The conditions stipulated in the 30 January 2023 circular are as follows:

1. The insurer has reported positive Profit After Tax (PAT) for the period for which the said commission is proposed to be paid
2. The Board of the insurer has passed the resolution approving such payment
3. The amount of payment of remuneration in the form of profit related commission to each of the non-executive director should not exceed the limits specified in the Guidelines on remuneration of non-executive directors and managing director/chief executive officer/whole-time directors of insurers, as amended from time to time
4. Disclosures with regard to the said payment should be made in the financial statements for the respective financial year, and
5. The insurer must comply with all other applicable laws in this regard.

Effective date: The provisions of the IRDAI circular are applicable with immediate effect.

To access the text of the circular, please click here