On 18th May 2016 Insurance Regulatory and Development Authority of India issued revised guidelines on corporate governance for insurance companies. In earlier post we discussed these guidelines in brief. In this post, we will briefly discuss, Key Management Persons for insurance companies as mentioned in these guidelines.
Discussion in this post is in continuation of the discussion about these committees in that post.
CEO/ Managing Director/ Whole-Time Director
The Chief Executive Officer/Whole Time Director/ Managing Director of the company and other key functionaries are responsible for the operations and day to day management of the company in line with the directions of the Board and the Committees set up by the Board. Section 34A of the Insurance Act, 1938 requires prior approval of the Authority for appointment, re-appointment or termination of the Chief Executive Officer and the Whole Time Directors. The Authority expects the CEO to be responsible for the conduct of the company’s affairs in a manner which is not detrimental to the interests of the policyholders and which is consistent with the policies and directions of the Board. The Board should, therefore, carry out effective due diligence to establish that the new incumbent is ‘fit and proper’ before recommending the name for Authority’s approval. The Insurance Act also prohibits the Managing Director or other Officer of a life insurance company from being a Managing Director or Other Officer of any other Life insurance company or of a Banking company or an Investment Company.
In case the CEO resigns, the Authority should be kept informed of such resignation and the reasons therefor. The insurers should also have practices in place for succession planning for the key senior functionaries through a process of proper identification and nurturing of individuals for taking over senior management positions.
Appointed Actuary shall be appointed as per IRDA (Appointed Actuary) Regulations, 2000, detailing the procedure for his appointment, qualifications, powers along with his duties and obligations. The Regulations also stipulate that prior approval of the Authority shall be taken for the appointment of the Appointed Actuary.
In order to facilitate the Appointed Actuary in discharging his/ her responsibilities, he/ she shall at all times be provided access to the information as required.
The insurance companies shall clearly set forth the Appointed Actuary’s responsibilities and any advisory role vis-à-vis the Board or the management as well as his/her rights and obligations. These shall be in addition to the duties of the Appointed Actuaries as specified in the IRDA Regulations and any other directions of IRDA in the matter.
As soon as the Appointed Actuary realizes that the entity does not comply or is likely to fail in complying with the requirements of solvency and other parameters of sound operations, he/she shall inform the Board of the insurer. If no viable/acceptable action is taken by the Board, then he/she has to inform the same to IRDAI.
The Board shall interact directly with the Appointed Actuary wherever it considers it expedient to secure his advice, it may do so in such manner as it may deem fit.
The Appointed Actuary shall provide professional advice or certification to the board with regard to:-
- Estimation of technical provisions in accordance with the valuation framework set up by the insurer
- Identification and estimation of material risks and appropriate management of the risks
- Financial condition testing
- Solvency margin requirements
- Appropriateness of premiums (and surrender value)
- Allocation of bonuses to with-profit insurance contracts Management of participating funds (including analysis of material effects caused by strategies and policies)
- Product design, risk mitigation (including reinsurance) and other related risk management roles.
Each insurer should designate Company Secretary as the Compliance officer whose duty will be to monitor continuing compliance with these guidelines. Annual Report of insurers shall have a separate certification from the Compliance Officer in the format. [Para 11.4]
Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.