On 31 March 2020, the Agency called on the supervised entities to suspend the payment of dividends as a preventive measure to ensure financial stability during the COVID-19 epidemic pursuant to the Insurance Act and the Macroprudential Supervision of the Financial System Act and in accordance with the international insurance standard and the guidelines of the European supervisory authority EIOPA.
On 7 April 2020, the Financial Stability Board issued the recommendation OFS/2020/01, calling on the supervisory authorities of financial companies to issue a supervisory measure to restrict dividend payments or to proceed with caution when paying dividends.
Furthermore, a similar recommendation was issued on 27 May 2020 by the European Systemic Risk Board.
The Agency notes that the situation regarding the COVID-19 epidemic and its impact on the economy and the insurance industry remain uncertain: "Certain risks have increased with the outbreak of the epidemic, and some new ones have emerged, but the current uncertainty about the further development of the epidemic does not allow a proper assessment of these risks. The aim of the Agency is for the insurance industry to be part of the solution and not part of the problem, and therefore it recommends that the supervised entities suspend dividend payments, undertake no irrevocable commitments to pay out dividends and refrain from buying treasury shares intended to reward shareholders even after the date stated in the letter, i.e. after 1 October 2020. The Agency recommends that the management boards of supervised entities propose to their supervisory boards and general meetings of shareholders to extend the moratorium on dividend payments at least until the moment of issuing the auditors' opinions on the 2020 annual reports".
However, the Agency is aware that the operations of supervised entities are impacted differently due to their different business models. "If any of the supervised entities fails to comply with this recommendation, it is required to notify the Agency at least one month before the intended payment of dividends. In the notification, the supervised entity must justify its decision and reasons for it, both qualitatively and quantitatively, on previously performed reliable stress test results with precise stress test assumptions and calculations of impacts on assets, liabilities, available capital and capital adequacy of the supervised entity for at least until the end of 2024".
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