IRDAI advises prudent management of financial resources

The Insurance Regulatory and Development Authority of India (IRDAI) has asked Indian insurers to prepare strategies and action plans for business continuity to ensure enhanced protection for policyholders.

In a circular issued on 13 April 2020, IRDAI member (finance and investment) Pravin Kutumbe said, “Due to the stress experienced by the economy (due to COVID-19 pandemic), sufficiency of capital and liquidity position of the insurers may be adversely impacted and all the insurers need to guard against the same.”

In view of the COVID-19 pandemic and the national lockdown which has now been extended up to 3 May 2020, various sectors of India economy may be adversely impacted. The Indian central government has already taken several steps to support the financial sector in its activities. IRDAI has also already announced several need-based relaxations to prevent any disruption to the activities of the insurance industry.

Mr Kutumbe said, “It is critical in these difficult times for all the Indian insurers to ensure that at all times they protect the interests of policyholders and provide necessary financial security to them.”

To achieve the target of protecting the interests of the policyholders, the IRDAI circular advised all insurers to take up the following steps.

(i) The boards of the insurers are required to examine their capital availability and solvency margin as required in the current financial year 2020-21 critically and devise strategies to ensure that they have adequate capital and resources available with them.

(ii) To align the dividend pay-out for the financial year 2019-20 so as to be in conformity with the strategy at (i) above; and

(iii) Rationalise the expenses of management for the financial year 2020-21 so as to be in line with the strategy at (i) above.

Source: Asia Insurance Review