OIC to maintain strict dividend measures
The Office of Insurance Commission (OIC) insists that it will continue its strict dividend payment measures for insurance firms until next year to ensure their financial health amid uncertainty regarding the global and domestic economies and Covid-19 vaccine development.
OIC secretary-general Suthiphon Thaveechaiyagarn said the strict policy was requested by the OIC's board to make sure cash outflow from dividend payments would not impact insurance companies' capital adequacy ratio (CAR) or their financial situation during the uncertain market conditions caused by the pandemic.
Normally the dividend payments of insurance companies must be approved by the OIC.
The Bank of Thailand earlier ordered banks not to pay interim dividends and not to repurchase shares to strengthen capital adequacy, as higher liquidity can provide a cushion for economic uncertainty.
Stronger capital gives banks a higher capacity to provide loans when the economy enters recovery.
The OIC approved dividend payments on Sept 14 for cases in which such payments would not affect the CAR.
Mr Suthiphon said there is a higher bar to clear since the pandemic started.
"Insurers must do a stress test analysis and provide this information to the OIC for consideration before a dividend payment is approved," he said.
The approval is also based on historical dividend payments, and the payment must be appropriate to each company's profitability.
For the first half 2020, according to the OIC's website, life insurance firms reported gross profit from underwriting of 29.3 billion baht, a 12% increase from 26 billion baht in the same period last year.
Non-life insurance firms reported gross profit from underwriting of 8.02 billion baht, surging 742% from 953 million baht in the same period last year.
"The OIC will stop approving dividend payments if the global and domestic economy change in a way that will have a negative impact on the CAR of insurers," Mr Suthiphon said.
Last month, the OIC board approved a revision to its risk-based calculation to come into effect at the end of this year. The regulatory tweak will have a positive impact on the CAR, according to the OIC.
The office also plans to reform other rules and regulations soon.