Irdai proposes 7 principles of stewardship for insurers

In order to improve the confidence of policyholders, regulator Irdai today came out with draft norms for insurers to bring in greater transparency in the manner in which investments are managed by them.

Stewardship Code for Insurers in India proposes a set of seven "principles" to be adopted by the insurers as institutional investors.

Stewardship activities include monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure, and corporate governance, including culture and remuneration.

Irdai said the growth in the insurance industry in recent years has resulted in a significant increase in the funds of insurance companies. They are also significant investors in the securities markets and act as investors on behalf of the policyholders.
 

"The principles are intended to strengthen the role of insurers as stewards on behalf of the policyholders. The Authority is of the view that adoption of the principles would improve the confidence of the policyholders in the insurers on one hand and also ensure better corporate governance and decision making at investee companies on the other," the regulator said while inviting comments on the exposure draft.

Comments could be made on the draft till February 15.

The first principle proposed by Irdai is that "insurers should formulate a policy on the discharge of their stewardship responsibilities and publicly disclose it".

They should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it. Further, insurers should monitor their investee companies.

Also, they should have a clear policy on intervention in their investee companies.

Another principle being prescribed the Irdai is that Insurers should have a clear policy for collaboration with other institutional investors to preserve the interests of the policyholders (ultimate investors), which should be disclosed.

The insurance companies should have a clear policy on voting and disclosure of voting activity; and also report periodically on their stewardship activities.