New Delhi: In the backdrop of the IL&FS scam that rattled the country’s financial institutions, the Insurance Regulatory and Development Authority of India (IRDAI) has cautioned insurance players about the need to be diligent on corporate governance in the sector.
IRDAI chairman Subhash Chandra Khuntia held a high-level meeting this week, in which all chiefs of insurance companies in India — both life and non-life insurers — were told to personally oversee board decisions of their companies to ensure that governance norms were not compromised.
A top IRDAI source told Financial Chronicle that the meeting was held in Hyderabad on February 19 and it was attended by 26 chairmen of both life and non-life insurance companies. “The chairmen of GIC Re and Agriculture Insurance Company were not invited to the meeting, as they are not directly involved in the commercial transaction in their businesses,” the source said on condition of anonymity.
When asked about the important issues that discussed in the meeting, the source said, “The issues involved in corporate governance were discussed, but the main focus of the discussion was the IL&FS fallout and its mismanagement and corporate governance violations.”
“Besides, the corporate issues like falling solvency margin, which indicates the financial health of an insurance company, risk-based capital and fair-value advantage were also discussed during the meeting. Apart from that concern was also expressed that how some of the insurers are constantly incurring underwriting losses,” the source added.
The high-level meeting was the first of its kind. “This was the first time that such a forum for open discussions between chairpersons of insurers and IRDAI was held. It was a proactive exchange of thoughts, suggestions and ideas and I hope some of these will get implemented in the coming months,” said the chief of a private insurer.
As of March 2018, IL&FS owed over Rs 94,000-crore to banks and other creditors and has been downgraded to junk status by rating agencies after it defaulted on debt repayments due to a liquidity crisis. Last year, the government also constituted a seven-member board, headed by veteran banker Uday Kotak, to submit a comprehensive resolution plan to revive the debt-ridden company....