XYZ, an insurance company is planning to adopt a code of corporate governance based on Corporate Governance Regulatory Framework. Explain the extent of responsibilities of a Board of Insurers to ensure good governance pr

The Insurance Regulatory and Development Authority of India (IRDAI) has issued the Guidelines on Corporate Governance which was revised in May 2016. The objective of the guidelines is to ensure that the structure, responsibilities and functions of Board of Directors and the management of the company recognize the expectations of all stakeholders as well as those of the regulator. The governance structure of the insurer could also be influenced by its association with an insurance group or a larger financial/ non-financial conglomerate. Insurers who are a part of a financial group could also be subject to the regulatory requirements on governance policies and practices established for the group level and implemented uniformly across the group. However, these practices should be reoriented at the level of the insurer taking into account its specific business and risk profile and sectoral regulatory requirements. Such insurers should nevertheless strive to maintain consistency in policies and practices in order to reinforce controls across the group. The specific areas of responsibilities of the Board of insurers are provided as under- (1) The Board should ensure that the Governance principles set for the insurer comply with all relevant laws, regulations and other applicable codes of conduct. (2) The Board should set the following policies in consultation with the Management of the Company: Define and periodically review the business strategy. Define the underwriting policy of the insurer. Determine the retention and reinsurance policy and in particular, the levels of retentions of risk by the insurer and the nature and extent of reinsurance protection to be maintained by the insurer. Define the policy of the insurer as regards investment of its assets consistent with an appropriate asset liability management structure. Define the insurer's policy on appointments and qualification requirements for human resources and ensure that the incentive structure does not encourage imprudent behaviour. (3) The Board should define and set the following standards:- Define the standards of business conduct and ethical behaviour for directors and senior management. Define the standards to be maintained in policyholder servicing and in redressal of grievances of policyholders. (4) The Board would be responsible to provide guidance for implementation of business strategy and review the same periodically. (5) As an integral part of proper implementation of the business strategy, the Board should take action as under:- Establish appropriate systems to regulate the risk appetite and risk profile of the Company. It will also enable identification and measurement of significant risks to which the company is exposed in order to develop an effective risk management system. Ensure that all directions of IRDAI are submitted to the Board and the recommendations are implemented as per the Board philosophy. Ensure that the IT systems in the company are appropriate and have built-in checks and balances to produce data with integrity and put in place a business continuity and disaster recovery plan. Ensure that the company has put in place a robust compliance system for all applicable laws and regulations. Prescribe requirements and frequency of reporting in respect of each of the above areas of responsibility as may be decided by the Board. (6) In discharge of the above and other Governance functions, the Board may delegate the responsibilities to mandated/ other recommended Empowered Committees of Directors while retaining its primary accountability.