Insurance sector regulator Irdai on Wednesday proposed a revised guidelines for remuneration for non-executive directors and persons in key managerial positions of private insurers to ensure alignment of compensation with prudent risk management.
The draft also said the maximum age limit for non-executive directors, including the chair of the board, should be 75 years and after attaining the age of 75 years no person should continue on the board of an insurer
Insurance sector regulator Irdai on Wednesday proposed a revised guidelines for remuneration for non-executive directors and persons in key managerial positions of private insurers to ensure alignment of compensation with prudent risk management.
In an exposure draft, the Insurance Regulatory and Development Authority of India (Irdai) said private sector suggested that insurers should formulate and adopt a comprehensive board-approved remuneration policy covering all the key managerial persons.
"The policy should be formulated such that the performance based variable remuneration shall not encourage key managerial persons to take inappropriate or excessive risks," it said.
The existing guidelines which came into effect from October, 2016 are the framework for remuneration of non-executive directors and CEO/WTD/MD of private insurers.
The guidelines have been in force for over 6 years and based on the experience of implementation, Irdai has proposed to "bring remuneration of other key managerial persons (KMPs) also within the ambit of the guidelines."
The draft proposes to replace extant guidelines.
"Annual remuneration shall be the aggregate of fixed pay (including monetary and non-monetary perquisites) and variable pay, for a particular financial year," said the draft on which the Irdai has invited comments from stakeholders till May 15.
It further said the post of the MD and CEO or whole-time director (WTD) should not be held by the same incumbent for a continuous period of more than 15 years. Thereafter, the individual can be eligible for re-appointment after a cooling off period of at least three years.
Also, no person should continue as MD and CEO or WTD with an insurer beyond the age of 70 years, Irdai's proposal said.
The draft further said that the total remuneration should not exceed Rs 20 lakh per annum for each non-executive director.
"If the chairperson of the company is a non-executive director, the remuneration may be decided by the board of directors of the insurer and, the remuneration policy shall specify the details of the remuneration and incentives to be paid to him/her," it said.
In addition to the directors' remuneration, the draft said, the insurer may pay sitting fees to the non-executive directors and reimburse their expenses for participation in the board and other meetings.
Non-executive directors would not be eligible for any equity-linked benefits.
The draft also said the maximum age limit for non-executive directors, including the chair of the board, should be 75 years and after attaining the age of 75 years no person should continue on the board of an insurer.