Insurers need to link top management payouts with risks: IRDAI

Insurers should ensure that compensation doled out to top level management personnel, including CEOs, are adjusted to risks in the business, according to insurance regulator IRDAI.
Issuing draft guidelines on remuneration of Chief Executive Officer/Whole-time Director/Managing Director of insurers, the watchdog said the risk-adjusted method should have both qualitative and judgmental elements.
"Insurers should formulate and adopt a comprehensive compensation policy and conduct annual review," it said.
Noting that payouts should be adjusted for all types of risks, IRDAI said that compensation outcomes are symmetric with risk outcomes as well as "sensitive to the time horizon of the risk".
"The mix of cash, equity and other forms of compensation must be consistent with risk alignment," the draft guidelines said.

At present, there is no laid down guidelines for insurers on remuneration paid to top level management.
In effect, there are no limits imposed by IRDAI on the remuneration structure barring the fact that remuneration beyond Rs 1.50 crore should be debited to shareholders' Fund, the regulator said.
"It is felt that there is an immediate need to lay down guidelines on compensation of the CEO/MD/WTD which needs to be kept in view while processing the remuneration application," it noted.