IRDA issues the Guidelines on Stewardship Code for Insurers in India
The Insurance Regulatory and Development Authority of India (“IRDA”) has issued the Guidelines on Stewardship Code for Insurers in India (“Guidelines”) on 22ndMarch, 2017. The Guidelines have been issued with a view to ensure that insurance companies improve their governance and ultimately improve the return oninvestment of insurers.
The IRDA had earlier revised the corporate governance guidelines for insurance companies which stressed on the governance of insurance companies and the state of governance at the companies where the insurance companies have invested.
Since insurance companies are significant institutional investors in listed companies and the investments are held by them as the custodians of policyholders, it was felt that the insurance companies must play an active role in the general meetings of the investee companies and also participate with the management of the investee companies for improving the governance.
By virtue of the Guidelines issued dated 22nd March, 2017, IRDA has therefore decided to implement a code for stewardship for the insurers. The Guidelines are a set of principles which the insurers must adopt.
The highlights of the Guidelines are as follows:
- Insurers should formulate a policy on the discharge of their stewardship responsibilities and publicly disclose it.
The policy should clearly define the stewardship responsibilities as identified by the insurer and how it intends to fulfill the same to enhance the wealth of its clients. The policy should disclose how the insurer applies stewardship with the aim of enhancing and protecting the value for the ultimate beneficiary or client.
- Insurers should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it
Insurers should put in place, maintain and publicly disclose a policy for identifying and managing conflicts of interest with the aim of taking all reasonable steps to put the interests of their client or beneficiary first.
- Insurers should monitor their investee companies.
Insurers should have mechanisms for regular monitoring of their investee companies in respect of their performance, leadership effectiveness, succession planning, corporate governance, reporting and other parameters they consider important.
- Annual Reporting to IRDA
The insurers must file a status report to the IRDA at a specified format on annual basis indicating the reasons/justifications for the deviation /non-compliance with the principles in the Guidelines.
[Note: The format for filing status report is provided in the attachment “Stewardship Code for Insurers” attached along with this mail.]
Source: IRDA (attached)