IRDA lays down stringent rules on corporate governance

The Insurance Regulatory and Development Authority or IRDA has laid out stringent new norms on corporate governance. The draft guidelines look at ensuring that the expectations of all stakeholders are met. The regulator is also keen on enforcing new rules for treating outstanding balances of insurance companies.

Here is a verbatim transcript of Avni Raja's comments on CNBC-TV18. Also watch the accompanying video.

The insurance regulator is in the process of issuing comprehensive guidelines on corporate governance for insurance companies. These guidelines are in addition to provisions of the Companies Act and the Insurance Act. The draft guidelines look at ensuring that the expectations of all stakeholders are met. The regulator also advises companies to familiarize themselves with Corporate Governance structures and requirements of listed entities to ensure smooth transition at the time of their eventual listing. The regulator has also issued guidelines for un-reconciled balances. That is, general insurance companies show outstanding balances due from re-insurance entities, as assets for an extended period of time. These assets are accounted for while computing the solvency margins.

The IRDA now wants balances to be reconciled every month, within 15 days. IRDA is also insisting that outstanding balances beyond 90 days would become zero for the purpose of calculating solvency margin.

As the insurance industry is maturing, the regulator too is keeping pace with the requirements of the sector. IRDA is already in the process of formulating a standard valuations procedure for companies, along with IPO and mergers & acquisition guidelines these are expected to be finalised over the next few months.