HUNGARY: MNB lifts the restriction on dividend payments

8 February 2022 —
The MNB (Hungarian National Bank) no longer considers it necessary to maintain the dividend payment limit for insurers. However, the dividend size must consider the Bank's recommendation to maintain the 50% volatility capital buffer, as well as the impact of the changing yield environment on capital, the MNB said in its recent statement, reports.

The MNB indicated that thanks to the stable capital position of insurers and reduction of insurance risks arising from the pandemic, it no longer considers it necessary to maintain the restriction on dividend payments in the sector.

Due to the pandemic, in April 2020 MNB set temporary suspension of payments. The central bank then proposed in October 2020 that the sector postpone its 2020 dividend payments until 2021. In the latter case, the MNB allowed such payments only if the capital adequacy of an insurer reaches or exceeds the average of international and domestic capital adequacy after performance.

Thanks to the MNB's actions, the level of capital of domestic insurers remained high last year (at the end of September, the sector-wide average was more than twice the legal requirement, 221%), and this was not jeopardized by the outflow of dividends. Thus, Hungarian insurers had sufficient capital strength to manage the risks arising from the pandemic.