Regulatory updates

In 2016, the Insurance Regulatory and Development Authority of India (IRDAI) had issued the framework for remuneration of non-executive directors/chief executive officer/whole time director/managing director of private sector insurers (the framework).

On 2 May 2023, IRDAI has issued an Exposure Draft (ED), thereby proposing to replace the extant guidelines of the framework. The ED aims to:

• Bring the remuneration of other KMPs¹⁵KMP, in relation to an insurer, means-member of the core management team of an insurer including all whole-time directors/managing directors/CEO and the functional heads below MD/CEO, the CFO, appointed actuary, chief investment officer, chief risk officer, chief compliance officer, chief underwriter, chief operating officer, chief marketing/sales officer, chief technical officer, Company Secretary, and any other KMPs as identified by the insurer also within the ambit of the proposed guidelines, and
• Provide better clarity to the extent of variable pay with respect to the total remuneration of directors and KMPs, variable pay deferral, malus and claw back provisions, accounting, disclosures, etc.

Some key aspects discussed in the ED include:

• Remuneration policy: It has been provided that the process of framing/reviewing the remuneration policy should be completed within three months of the issuance of the guidelines in this behalf
• Components of remuneration structure: The remuneration policy should cover all aspects of the remuneration structure¹⁶Aspects of the remuneration structure include fixed pay (including allowances), perquisites, retirement benefits, variable pay including incentives, bonus, share linked instruments, joining/sign on bonus and severance package. Further, it has been specified that all these details should be incorporated in a single document. and the remuneration policy should be reviewed annually by the Nomination and Remuneration Committee (NRC)
• Disclosures: Certain quantitative and qualitative disclosures have been mandated in the notes to accounts forming part of the annual report:

Effective date: The revised guidelines have been proposed to be made applicable for the remuneration payable to KMPs from F.Y. 2023-24.

The comment period ended on 15 May 2023.

To access the text of the ED, please click here