IRDAI withdraws circular barring insurers from paying dividends
Insurance regulator says decision taken after the revival phase of the economy and the industry. Asks companies to consider capital, solvency and liquidity positions while declaring dividends.
February 25, 2021 / 06:16 PM IST
The Insurance Regulatory and Development Authority of India (IRDAI) has withdrawn an April 2020 circular that barred insurers from paying dividends till further instructions.
In a circular issued on February 25, the regulator said that the earlier circular is withdrawn, considering the revival phase of the economy, in general, and the insurance industry, in particular.
The regulator added that this decision has been taken after reviewing the solvency position of the insurers. This circular is applicable with immediate effect.
This means good news for shareholders since insurers can start declaring dividends for FY21 based on their profits and capital positions.
However, IRDAI has asked insurers to take a conscious call in the matter of declaring dividends for FY21, considering their capital, solvency and liquidity positions.
“The situation has been assessed based on the financial results of insurers for the quarters ending September 30 and December 31, 2020. It is 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,” the regulator said.
When India started seeing its first cases of COVID-19 in March 2020, a nationwide lockdown was announced from the last week of that month.
This led to business disruptions for the insurance sector, which then started receiving life and health insurance claims. However, signs of recovery have been seen across the industry from July 2020 onwards.
The first-year premium of life insurers increased by 3.7 percent in January 2021 to Rs 21,390 crore due to an increase in single premiums.
Non-life premiums rose by 2.76 percent to Rs 1.63 lakh crore as of January 31, 2021.