To

CEO of All Insurers/ Reinsurers

Dear Sir,

Corporate Governance Guidelines for Insurance Companies- Amendment No. 1

This has reference to circular No. IRDA/F&A/CIR/025/2009-10 dated 05th August, 2009 notifying “Guidelines on Corporate Governance for the Insurance Sector”. Authority has carried out a review of the guidelines in view of various comments received from insurers and other stakeholders.

A. The following amendments are made to the captioned circular :

1. Para 5.1: Board of Directors – Composition :

The last bullet point of para 5.1- of the guidelines is replaced as under :

• As a matter of prudence, not more than one member of a family, or a close relative as defined in the Companies Act or an associate (partner, director, etc.,) should be on the Board of an Insurer as ‘Independent Director’.

2. Para 7.5 : Policyholder Protection Committee

The date of issue of ‘Guidelines on Advertisements, Promotion & Publicity of Insurance Companies and insurance Intermediaries’ mentioned in para 7.5 may be read as May 2007 in place of January 2006.

The following is added to para 7.5:
“The reports of the Policyholders’ Protection Committee should be on the agenda of every Board meeting of the company.”

3. Para 5.4: Conduct of Meeting

The following is added to para 5.4:

“The company must disclose the following in their annual report, inter alia,

(i) Number of the meetings held of the Board of Directors and Committees mandated under the guidelines, in the financial year.

(ii) Details of the composition of the Board of Directors and Committees mandated, setting out name, qualification, field of specialization, status of directorship held etc.

(iii) Number of the meetings attended by the Directors and the members of the committee.

(iv) Detail of the remuneration paid, if any to the independent director.

4. Para 7.4 : Asset Liability Management Committee

Attention is drawn to para 7.4 of the guidelines on Asset Liability Management (ALM) Committee. An option is given to life insurers to make it part of the Risk Management Committee provided that the terms of reference of ALM are made part of the Risk Management Committee.

5. Para 7.7 : Nos. of Meeting Etc. :

A new para 7.7 is added after para 7.6 which reads as

• All the mandatory committees should meet at least four times in a year and not more than four months shall elapse between two successive meetings. The quorum shall be either two members or one third of the members of the committee whichever is greater, but in case an independent director is mandated to be in any of the Committees, he/she should be necessarily present to form the quorum.

6. Para 12.4 Reporting to IRDA

Para 12.4.2 of the guidelines stands replaced as under:

“Each insurer should designate their Company Secretary as the Compliance Officer whose duty will be to monitor continuing compliance with these guidelines”.

7. New Clause 12.4.3 will be added as under : Annual report of insurers will have a separate certification from the compliance officer in the format attached herewith as annexure.

B. The following clarifications are provided:

1. These guidelines applicable to insurance companies and reinsurance companies except that Reinsurance Company will not require to have the Policyholders’ Protection Committee.

2. Mandatory committees should necessarily comply with the stipulations of these guidelines and no merger of any of these committees is permissible except the one indicated at para 4 above.

All other instructions / guidelines stand unchanged. Insurers are advised to take necessary action to ensure that the compliance of the Guidelines is in place latest from the financial year commencing April 01, 2010.

(R Kannan)

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