The Insurance Board (IB) — insurance sector regulator of thecountry — has placed curbs on the salary and allowances of chief executiveofficers (CEOs) of insurance firms. The IB has issued a circular to theinsurance firms that have placed restrictions on the salary and facilities ofCEOs those insurance companies have to execute from today.

Insurancefirms can pay up to six per cent of average expenses made for total salariesand allowances of staffers in the last three fiscals to the chief executive or0.5 per cent of the average of the three fiscal’s total assets, whichever islower.

IBhas instructed the insurance companies to pay attention to the solvency of thecompany, salary of the CEOs in other similar companies in the country,management cost, claim settlement, insurance surrender, compliance,underwriting profit of last three fiscals, financial status of the company andrenewal rate of insurance policies — especially for life insurers — whilefixing the salary and allowances of the CEO.

Chairmanof IB, Chiranjibi Chapagain, has said that the insurance sector regulator hasprovided this guidance to the insurance firms to prevent unhealthy competitionin the market after the entry of new players. The IB has issued licence to eightnew life insurers and extended letter of intent (LoI) to three non-life firms afew months back. There are altogether 17 life insurance firms in operation andthere will be 20 non-life firms if the IB extends licence to the companies thathave received LoI from the insurance sector regulator.

Newlyopened insurance firms will have to fix the salary and allowances of CEOs basedon the lowest industry average of the last three fiscals of insurance firms inoperation. However, new companies can offer up to 150 per cent of theindustrial average to the CEO for the first contractual period. Industrial average means up to six per cent of the three fiscal’s averageexpenses of the insurance firms or up to 0.5 per cent of the average asset ofthe three fiscals, whichever is lower.

TheInsurance Board has also issued an instruction to the insurance firms toprovide additional facilities based on the performance of the company.Insurance companies cannot extend incentives like bonus as per the labor actand other prevailing acts. The incentives must not exceed 70 per cent of thetotal salary and allowances, which is up to six per cent of the total staffexpenses or 0.5 per cent of the assets, whichever is lower. If the additionalfacilities exceed 40 per cent of annual salary and allowances, the amountexceeding 40 per cent should be put into the reserve fund for three years andthat needs to be mentioned in reverse income in financial statement of thecompany if it incurs a loss.

However,the insurance companies can provide facility of life insurance and medicalinsurance to the CEO and health insurance to family members of the CEO.

Source:The Himalayan Times, 18^th December, 2017