IRDAI has released guidelines for prudent management of financial resources of insurers in the context of Covid-19 pandemic.
This includes critically examining their capital availability and solvency margin as required, and devise strategies to ensure that they have adequate capital.
The Insurance Regulatory and Development Authority of India (IRDAI) vide Circular No: IRDA/F&A/CIR/MISC/089/04/2020 dated 13.04.2020 has issued guidelines to All the Insurers for prudent management of financial resources of insurers in the context of Covid-19 pandemic.
The pandemic has cast its shadow across various economic activities with massive dislocation in global production, supply chains and trade. The Organization for Economic Cooperation and Development (OECD) estimates suggest that annual global gross domestic product (GDP) growth could be lower by up to 2 percentage points for each month in which strict containment measures continue. 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.
The IRDAI Authority advises all insurers to take following steps:
Board of insurers are advised to critically examine their capital availability and solvency margin as required in the current financial year 2020-21 and devise strategies to ensure that they have adequate capital and resources available with them;
To align the dividend pay-out for the FY 2019-20 so as to be in conformity with the strategy at (i) above; and
Rationalize the expenses of management for the FY 2020-21 so as to be in line with the strategy at (i) above.
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