Insurance regulator IRDAI has withdrawn an April 2020 circular in which it had advised insurers to refrain from dividend payouts until further instructions, in view of the emerging market conditions.
Considering revival of the economy in general, and insurance industry in particular, as well as taking into account solvency position of the insurers, it has been decided to withdraw the applicability of the April 24 circular with immediate effect, the regulator said on Thursday. “However, insurers are requested to take a conscious call in the matter of declaring dividends for 2020-21 considering their capital, solvency and liquidity positions,” Pravin Kutumbe, Member (Finance and Investment) said in the latest circular.
The decision of IRDAI follows an assessment based on financial results of the insurers for the September and December quarters. “The performance of the insurers in terms of business is gradually reviving albeit at a slower pace vis-a-vis the pre-covid levels,” the communication said.
On the back of enhanced demand for health insurance, general insurers, including standalone health insurers and specialised PSU insurers, had posted a 2.53% increase in gross direct premium underwritten for the six months ended December to ₹1,45,678.82 crore (₹1,42,085.06 crore). Life insurers, however, had reported a 1.69% decline in their first year premium for the same period to ₹1,91,046.39 crore (₹1,94,331.10 crore). While private life insurers posted an increase of 6.54%, public sector behemoth LIC saw a 5.13% decline.
The April circular had said as part of measures to prudently manage their financial resources, all insurers were directed to align dividend payout 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. In view of the emerging market conditions and to conserve capital, insurers are urged to take a conscious call to refrain from dividend payouts from profits pertaining to the financial year ended March 31, 2020, till further instructions.