The Insurance Regulatory and Development Authority has issued comprehensive corporate governance guidelines for insurance companies, consolidating the various regulations notified by it from time to time, covering different operational areas.

Most of the private insurance companies are still unlisted and they will have to familiarise themselves with the corporate governance structure and requirements applicable to listed entities, and address the gaps, if any, IRDA said.

The guidelines are on the lines of SEBI's regulations on corporate governance for listed corporations.

With respect to the board composition for insurance companies, 50 percent of the members shall be independent if the Chairman's post is non-executive, and one third independent if the company has an executive Chairman, according to the guidelines.

Auditors, actuaries, directors and senior managers shall not simultaneously hold two positions in the insurance company that can result in a conflict of interest. (Under the Insurance Act, life insurance agents cannot be directors of a life insurance company. Also, there shall be no common directorship between life insurance companies).

Directors of insurance companies also have to make a declaration that they have not come under adverse notice of any tax or regulatory agency or any other professional body.

Also, they are required to enter into a deed of understanding to ensure that there is a clear understanding of the mutual role of the company and the board in relation to any corporate governance matter.

The guidelines have recommended the audit, investments, risk management policy holder protection, and asset liability management committees (for life insurance companies) as mandatory.

They also recommend encouragement of a whistle-blower policy so that employees may raise concern about possible irregularities.

IRDA has also issued operational guidelines for asset classification of outstandings. Often a lot of business outstandings among the companies are carried through for an indefinite period of time; they end up being classified as assets and are taken into account to arrive at the solvency ratio of a company. IRDA said that outstandings of over 90 days will have to be closed and will not count as assets for solvency purposes.

For legacy outstandings, companies will have to close them in three quarterly phases.