The Insurance Regulatory and Development Authority of India (IRDAI) wants insurance companies to critically examine their capital availability and solvency margin for the current financial year (2020-21).
Advising their boards to undertake such an exercise, the regulator said the need for them was to devise strategies for ensuring that the insurers had adequate capital and resources available with them.
Two more measures it urged the boards to initiate were, to align the dividend payout for FY 2019-20 in conformity with the adequate capital and resources strategy and to rationalise the expenses of management for 2020-21, also in line with the strategy.
The IRDAI advisory, coming in the backdrop of COVID-19 outbreak, said that the spread of the virus and further extension of the lockdown were likely to have a significant impact across various sectors of the economy.
“Indian insurers need to prepare strategies and action plans for business continuity to ensure enhanced protection to the policyholders. Due to the stress experienced by the economy, sufficiency of capital and liquidity position of the insurers may be adversely impacted and all the insurers need to guard against the same,” the regulator said.
“It is critical in these difficult times for all the Indian insurers to ensure that at all times they protect the interests of policyholders and provide necessary financial security to them,” Pravin Kutumbe, member — Finance and Investment, said in the circular to insurance companies on prudent management of financial resources in the context of the pandemic.
The communication said while the Central Government had taken steps to support the financial sector, IRDAI had announced several need-based relaxations to prevent any disruption to the activities of the insurance industry.
