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Remuneration to Directors and KMPs of Insurers – Enhanced Guidelines with Extended Coverage

Introduction

The remuneration payable to Chief Executive Officers (“CEOs”), Whole-Time Directors (“WTDs”) and Managing Directors (“MDs”) of insurance companies is governed under Section 34A of the Insurance Act, 1938. This provision requires insurers to procure prior approval from the Insurance Regulatory and Development Authority of India (“IRDAI”) in relation to such remuneration. The IRDAI (Remuneration of Non-Executive Directors of Private Sector Insurers) Guidelines, 2016 and IRDAI (Remuneration of Chief Executive Officer/Whole Time-Director and Managing Director of the Insurers) Guidelines, 2016 dated August 5, 2016 (collectively, the “Erstwhile Guidelines”) have historically governed this matter. In supersession of the Erstwhile Guidelines, the IRDAI has recently notified the Guidelines on Remuneration of Directors and Key Managerial Persons of Insurers, on June 30, 2023, which includes the IRDAI (Remuneration of Non-Executive Directors of Insurers) Guidelines, 2023 and IRDAI (Remuneration of Key Managerial Persons of Insurers) Guidelines, 2023 (collectively, the “Revised Guidelines”). The Revised Guidelines are effective from the FY 2023-24 i.e. from April 1, 2023 and the insurers are required to complete the process of framing/reviewing the remuneration policy within three months of the issuance of the Revised Guidelines.Continue Reading Remuneration to Directors and KMPs of Insurers – Enhanced Guidelines with Extended Coverage

Interpreting Insurance Contracts Special Considerations – Part I

Insurance is the act of providing against a possible loss, by entering into a contract with one who is willing to give assurance — that is, to bind himself to make good such loss should it occur. In this contract, the chances of benefit are equal to the insurer and the insured. The first actually pays a certain sum and the latter undertakes to pay a larger, if an accident should happen. The one renders his property secure; the other receives money with the probability that it is clear gain. The instrument by which the contract is made is called a policy; the stipulated consideration a premium.[i]Continue Reading Interpreting Insurance Contracts: Special Considerations – Part I

COVID-19: Absence of Legislative Intervention may impact Commercial Insurance Claims

The onset of the COVID-19 pandemic and the subsequent nationwide lockdown to control its spread has impacted businesses significantly and also led to various entertainment and sporting events being either postponed or cancelled. While one would expect business interruption and event cancellation insurance to cover such losses, such claims are likely to encounter certain issues, which are discussed in this post.

Being Covered under an Insured Peril

Most insurance policies have a list of causes/ events that are covered by the policy. These events/ causes are called insured perils. Only losses/ damages that are caused by insured perils can form the basis of a claim under the said policy. For instance, the policy wording of a standard-form future events insurance covers certain specified losses if any insured event is cancelled due to either (i) loss or damage to the venue due to fire, allied perils, earthquake, flood or cyclone, resulting in cancellation of the event; or (ii) death of current Prime Minister, President of the Republic of India, Chief Minister of the State in which the event is being held, due to which National/ State mourning is declared or any other prominent personality.[1] Claims under such policies are generally triggered when events like sporting tournaments, award functions, etc., are cancelled due to insured perils. It is possible for insurance companies to include epidemic/ pandemic as an insured peril in such policies and charge a higher premium for doing so. For instance, the All England Lawn Tennis Association has been paying a higher premium for the past 15 years for such insurance.[2] In contrast, the cancellation of Indian sporting events like the Indian Premier League are unlikely to have insurance coverage for epidemic/ pandemic since the same are generally not underwritten by insurers in India.[3]
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100% FDI allowed in insurance intermediaries - No more ‘peekaboo’!

The Government of India notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2020 (“Non-Debt Rules Second Amendment”) on April 27, 2020, amending the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. With this amendment, foreigners can now look to acquire 100% stake in an insurance intermediary, subject to verification by the Insurance Regulatory and Development Authority of India (IRDAI). This amendment was much awaited by insurance intermediaries[1], which have in the past lobbied to be declassified from the same bracket as insurance companies, in so far as foreign investment was concerned.
Continue Reading 100% FDI allowed in insurance intermediaries – No more ‘peekaboo’!