Irdai withholds variable pay of some insurers' CEOs over expense targets

Regulator's action follows unmet 'expense of management' targets

The performance-linked pay of the chief executives of some insurance companies has been withheld by the Insurance Regulatory and Development Authority of India (Irdai) after the insurers failed to meet the targets regarding the “expense of management” (EoM) or adhere to their glide paths, according to sources aware of the development. 

The action is based on the regulator’s insurers’ performance in FY25 and the trends seen in the opening quarters of FY26, followed by a review of the I in the first two months of 2026. 

An email sent to Irdai did not elicit a response till the time of going to press. 

“At the end of FY25, the companies submitted board-approved compensation proposals, including variable pay for chief executives and other key management persons. In cases where insurers were significantly away from the prescribed EoM targets and had failed to stick to the committed glide path, Irdai has withheld approval for the variable component,” a person familiar with the matter said. The regulator, however, has not interfered in fixed compensation, the person added. 

According to industry executives, Irdai has generally taken a softer stance where insurers, despite breaching EoM thresholds, demonstrated a gradual reduction in expenses in line with board-approved plans. 

The tougher action has been reserved for insurers where deviations remained materially high or where no meaningful progress was visible. “FY26 was effectively the outer timeline by which insurers were expected to either comply with EoM norms or move meaningfully towards the levels committed to the regulator. Firms that remained significantly misaligned had stricter scrutiny,” a senior insurance executive said. 

Under the EoM framework, insurers are permitted operational flexibility so long as overall management expenses remain within prescribed ceilings linked to gross written premium (GWP). 

For general insurers, the cap is 30 per cent of GWP while standalone health insurers are allowed up to 35 per cent. 

The regulations also required insurers that breached EoM limits in FY23 to submit board-approved glide paths outlining how they would return to compliance by FY26. Insurers less than five years old were eligible for case-by-case regulatory forbearance. 

The rules further empower Irdai to withhold variable pay for key management executives if the EoM exceeds board-projected business plan limits by more than 10 per cent. 

People familiar with the process said insurers that failed to comply were asked to provide detailed explanations during the review. In cases involving significant breaches, approvals for the performance pay of chief executives linked to FY25 were deferred.