Irdai withdraws circular on dividends for FY20, ask insurers to take conscious call for current fiscal

Insurance sector regulator -- Insurance Regulatory and Development Authority of India (Irdai)  has withdrew its circular on dividend payouts for 2019-20 by insurers in the wake of COVID-19, citing improving economic conditions, and said they should take a conscious call on dividends for the current year. The Irdai had in April 2020 asked insurance companies to manage their resources prudently. It had directed all the insurers to align their dividend payouts for 2019-20 so as to be in conformity with their strategies to ensure they have adequate resources for the protection of interests of the policyholders.

The regulator said the Authority has been assessing the economic position both at global level and at the Indian context, in general and the insurance sector in particular. The regulator said it has assessed the situation based on the financial results of the insurers for quarters ended September and December 2020. It observed that the performance of the insurers in terms of business is gradually reviving, albeit at a slower pace vis-a-vis the pre-COVID levels.

It said ‘Considering the revival phase of the economy in general and the insurance industry in particular, and taking into account the solvency position of the insurers, it has been decided to withdraw the applicability of the circular dated 24th April 2020 mentioned above with immediate effect’. However, insurers are requested to take a conscious call in the matter of declaring dividends for FY 2020-21 considering their capital, solvency and liquidity positions.