IRDAI issued updated guidelines on Friday in regards to renumeration to key managerial personnel (KMPs) of private sector insurance companies. The insurers have three months to frame and review their remuneration policies in accordance with these guidelines.
IRDAI recommended that insurance companies develop and implement a "comprehensive board approved" remuneration policy that would apply to all KMPs. Additionally, important executive personnel should not be encouraged by the policy to take excessive or improper risks in exchange for their performance-based variable compensation. “The board shall ensure and document that in structuring, implementing and reviewing the remuneration policy, members of the board shall not placed in a position of actual or perceived conflict of interests with respect of remuneration decisions,” the revised guidelines said.
The revised guidelines state that overall financial soundness, including net worth position, solvency, growth in AUM and net profit, compliance with expenses of management (EoM) regulations, claim efficiency in terms of settlement and outstanding, among others, are the minimum factors that an insurance company should take into account when determining performance assessment of all KMPs for payment of variable pay or incentives. These factors ought to account for at least 60% of the MD/CEO/WTDs (whole-time directors) performance evaluation matrix's overall weighting and at least 30% of the overall weighting of each of the other KMPs.
“Variable pay shall be at least 50% of the fixed pay for the corresponding period and shall not exceed 300% of the fixed pay. Where variable pay is up to 200% of the fixed pay, a minimum of 50% of the variable pay shall be via non-cash instrument. The same limit would be 70%, in case the variable is above 200% of the fixed pay,” the guidelines said, adding a minimum of 50% of the total variable pay must invariably be under deferral arrangements and the deferral period should be a minimum of three years.
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Source: https://www.financialexpress.com/money/insurance/irdai-asks-private-insurers-to-frame-pay-norms-for-top-brass-within-3-months/3150658/
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