IRDAI Mandates Performance-Linked KMP Pay for Insurers

Circular No. IRDAI/F&I/CIR/MISC/72/5/2026, Dated 25.05.2026

The Insurance Regulatory and Development Authority of India (IRDAI) has amended the Master Circular on Corporate Governance for Insurers, 2024 with immediate effect to strengthen the governance framework relating to remuneration of Key Management Persons (KMPs).

The amendments introduce enhanced disclosure obligations, mandatory performance assessment parameters and stronger alignment of remuneration structures with policyholder outcomes and risk management objectives.

1. Mandatory Website Disclosure of KMP Remuneration Parameters

Under the amended framework, insurers are required to disclose on their websites:

• Performance parameters adopted for determining remuneration of KMPs;
• Incentive structures applicable to KMPs; and
• Variable pay criteria applicable to KMPs

The disclosure requirement applies to all Key Management Persons (KMPs).

2. Disclosure of Preceding Three Years’ Information

In addition to current-year disclosures, insurers must also publish corresponding information for the preceding three financial years.

This requirement seeks to improve transparency and provide visibility into remuneration-linked performance assessment practices over time.

3. Mandatory KMP Performance Assessment Parameters for FY 2026–27

For FY 2026–27, insurers are required to assess performance of KMPs based on prescribed mandatory parameters.

These include:

• Financial soundness of the insurer
• Performance of products
• Claim responsiveness
• Grievance redressal efficiency
• Implementation of Indian Accounting Standards (Ind AS)
• Removal of dark patterns in interactions with policyholders

The prescribed parameters are intended to ensure that remuneration outcomes are linked with both financial and customer-centric performance indicators.

4. Alignment of Remuneration With Policyholder Outcomes and Risk Management

The circular further mandates that the Nomination and Remuneration Committee (NRC), in consultation with the Risk Management Committee (RMC), shall ensure that remuneration policies are:

• Aligned with policyholder outcomes
• Appropriately adjusted for risks
• Linked with risk outcomes
• Structured with regard to relevant time horizons

The requirement seeks to strengthen governance and discourage short-term incentives misaligned with long-term prudential and customer interests.

5. Role of Nomination and Remuneration Committee

The Nomination and Remuneration Committee, in consultation with the Risk Management Committee, will be responsible for ensuring appropriate design and implementation of remuneration policies consistent with governance and risk objectives.

The framework seeks to ensure balanced incentive structures and accountability in performance-linked compensation.

6. Immediate Effect of the Amendments

The amendments to the Master Circular on Corporate Governance for Insurers, 2024 have come into force with immediate effect.

Accordingly, insurers will be required to align governance and remuneration practices with the revised framework.

7. Objective of the Amendments

The amendments aim to strengthen governance, transparency and accountability in remuneration practices for Key Management Persons in insurance companies.

By linking remuneration to financial soundness, policyholder outcomes, risk-adjusted performance and long-term sustainability, IRDAI seeks to reinforce prudent management and customer-centric governance in the insurance sector.

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