The Insurance Regulatory and Development Authority of India (IRDAI) has advised insurers to take a conscious call to refrain from dividend pay-outs for 2019-20, for now, as part of measures to prudently manage their financial resources.
Conserve capital
“In view of the emerging market conditions and to conserve capital with the insurance companies in the interests of the policyholders and of the economy at large, insurers are urged to take a conscious call to refrain from dividend pay-outs from profits pertaining to the financial year ending March 31, 2020, till further instructions,” a circular from the regulator on Friday said. This position will be reassessed by the Authority based on financial results of the insurers for the quarter ending September 30, 2020, Member (Finance and Investment) Pravin Kutumbe said.
The circular is in continuation of another on ‘Prudent management of financial resources of insurers in the context of COVID-19 pandemic’ the regulator had issued earlier on April 13. In the previous circular, it had directed insurers to align dividend pay-out for 2019-20 in conformity with their strategies to ensure that they have adequate capital and resources available with them to ensure protection of the interests of the policyholders.
The regulator had also wanted insurance companies to critically examine their capital availability and solvency margin for 2020-21 as well as rationalise expenses of management. The IRDAI had mentioned this while pointing out that due to the stress experienced by the economy, sufficiency of capital and liquidity position of the insurers may be adversely impacted and they need to guard against the same.
