KATHMANDU, Aug 18: At a time when a provision to cap the tenure of board directors of bank and financial institutions (BFIs) for a maximum of two terms is facing steep opposition, Beema Samiti has brought corporate governance directive for insurance companies that prohibits a board director from taking the post for more than two terms.
Releasing 'Governance Related Directive for Insurers, 2073', the insurance market regulator has said that board directors will have a term of four years, and can get appointed for additional one term.
Fatta Bahadur KC, chairperson of Beema Samiti, told Republica that the set of corporate governance directives, which was issued four years ago, has been revised to put in place measures for ensuring more transparency and internal control in insurance companies as well as strengthening their internal governance system.
While there was a provision that capped the term of a board director at four years, there was not limitation on the number of terms.
"The new corporate governance directive is an updated version of the earlier directive. It enables us to protect the interest of insured, public shareholders and all stakeholders by promoting transparency, good governance and accountability," said KC. "This will also help to increase public confidence in the insurance sector."
The new directives have also offered some relaxation in qualification as well as pay and perks of the CEO. According to the new rule, an insurance company can now recruit an individual holding Masters degree as CEO. But s/he should have working experience of five years in the management level of insurance sector or eight years in BFIs or seven year if it is in both BFIs and insurance sector with at least one year in insurance sector.
Earlier, insurance companies could appoint a person having work experience of at least 10 years in the management level.
The revised directive has also reduced the work experience requirement for department chief.
"While keeping the academic requirements intact, we have decided to offer relaxation in work experience requirements. This was done as there were complaints that it was a bit difficult to get the CEO or department chiefs on such relatively tighter requirements," Sushil Dev Subedi, a deputy director of Beema Samiti, told Republica.
Similarly, the new directive has also provided flexibility on pay and perks of CEO. Now, insurance companies can pay their CEO up to 25 times higher than their junior-most staff based on the underwriting profits of the company.
However, such pay and perks have to be approved by the general body meeting of the company.
Executives of the insurance companies have hailed the new provisions. "The reviewed directives seem progressive as it has, among others, allowed tying up the pay and perks with the capacity and performance of the CEO," Vivek Jha, CEO of Nepal Life Insurance Company Ltd, told Republica. "The relaxation on experience requirements for hiring will also make it easier to find capable managerial and executive level staffers," he added.
Insurance company to have compliance officer
Beema Samiti has made it mandatory for all insurance companies to appoint a compliance officer.
The 'Governance Related Directives for Insurers, 2073' issued by the insurance market regulator has directed all insurance companies to appoint a compliance officer within three months as part of measures to ensure internal control in a company.
According to the directive, the compliance officer, to be appointed amongst managerial level staffers, should ensure that the insurance company is abiding by the directives, circulars, laws, rules as well as the instructions issued by the regulators at times during its monitoring, supervision or regulation.
The compliance officer will have to prepare quarterly reports detailing observations about the compliance, and will be responsible for the truth and authenticity of the report, according to the directive.
Corporate governancedirectives for insurance companies
• Person with permanent residency permit/DV/PR of a foreign country disqualified for CEO
• Ban on appointment of advisor for day-to-day
managerial, administrative work
• Beema Samiti approval must for appointing advisors
• Officer-level staff need to have completed at least a bachelors’ degree
• Relaxation in work-experience requirement for CEOs, department chiefs
• Meeting of board of directors should be held at least six times a year
• BoD should hold interaction with top management at least in every six months
• Board directors should have at least bachelors’ degree