The insurance regulator has asked companies to play an active role in the general meetings of investee companies and engage with the management at a greater level to improve governance so as to increase returns on investments for insurers.
"Insurance companies are significant institutional investors in listed companies and the investments are held by them as custodians of policyholders. Therefore, it is felt that insurance companies should play an active role in general meetings of investee companies and engage with the managements at a greater level to improve their governance. This will result in informed decisions by the parties and ultimately improve the return on investments of insurers." Insurance Regulatory and Development Authority (Irda) stated in a circular titled 'Guidelines on Stewardship Code for Insurers in India'.
This will be applicable from next financial year.
The regulator said the state of governance at the companies where insurance companies have invested is important. It has also laid out a set of principles, which insurers will have to adopt. The principles are being uniformly adopted for institutional investors like mutual fund, pension funds, foreign portfolio investors and alternate investment funds.
Irda has also decided to implement a code of stewardship for insurers. The regulator said all insurers need to draw up a policy based on principles spelt out in stewardship code within six months from date of issue of these guidelines and the board of directors should approve the same.
Globally, companies are required to say which are the companies they have voted for and against in general meetings and disclose their stance.