Hyderabad:
In view of the spread of Covid-19 pandemic, the insurance regulator IRDAI has asked the insurers to tighten their belts and be cautious while paying any dividends to their shareholders,rationalise the expenses of management, critically examine their capital availability and solvency margin as required in the current financial year 2020-21.
Emphasising on prudent management of financial resources by the domestic insurers in the days of Covid-19 pandemic and ongoing lockdown in the country, the board of insurers are advised to devise strategies to ensure that they have adequate capital and resources available with them, said Pravin Kutumbe,member(Finance & Investment),IRDAI, in a circular to the insurers on Monday.
“We are advising you to align the dividend pay-out for the FY 2019-20 so as to be in conformity with the new prudential financial management strateges’’ said Kumbe to all insurers,'' said Kutumbe.
` 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. Indian insurers need to prepare strategies and action plans for business continuity to ensure enhanced protection to the policyholders, he added.
With the spread of Covid-19 in the country and 21-day nationwide lockdown from 25 March 2020 to 14 April 2020 and further extension of lockdown by several State Governments, there is likely to be a significant impact across various sectors of the economy, said IRDAI.
The slowdown could be more protracted in dire scenarios in which the duration of COVID-19 extends longer. If the shutdown continues for three months with no offsetting factors, annual GDP growth could be between 4- 6 percentage points lower than it otherwise might have been”. The emerging scenario is likely to leave an impact on both liquidity, sufficiency and availability of capital, said IRDA..