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EIOPA urges insurers to halt dividends, buybacks, and bonuses

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EIOPA, the EU’s insurance and pensions regulatory body, is urging insurance companies to halt dividends, buybacks and bonuses in the wake of the Covid-19 outbreak. A statement released on 17 March 2020 stated:

“Against this background of uncertainty, EIOPA urges that at the current juncture (re)insurers temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This suspension should be reviewed as the financial and economic impact of the COVID-19 starts to become clearer.”

EIOPA urged insurers to “take all necessary steps to continue to ensure a robust level of own funds to be able to protect policyholders and absorb potential losses”, yet the statement seems to have been met with a tepid response. In March, Munich Re said that it would halt buybacks but continue with its planned dividend, while shareholders of Zurich, which is not based in the EU, approved the issuance of planned dividends for 2020. Other major EU-based insurance companies including Allianz and AXA will issue annual dividends in April.

Allianz reported to Reuters that it was in “good shape” and wanted to maintain both dividends for 2019 and a €1.5 bn ($1.6bn) share buyback.

Yet as of 3 April, the New York Times reports that shares in European insurers fell after the EIOPA statement, with shares of NN Group and Aegon falling as much as 10%. Life insurance carrier CNP (France) fell 7% and British insurers saw losses of more than 6%. The Times reports that analysts at JPMorgan Cazenove say that halting dividends would remove one of the sector’s main attractions.

The scale of insurance claims that will be caused by the coronavirus outbreak is still unclear. Insurers say that they will pay out on more than a dozen different lines of business, from travel and life insurance to directors’ and officers’ liability claims, but have declined to publicly put a figure on the potential claims. Some in the industry privately say that the total bill could reach more than $50bn.

The complete EIOPA statement can be downloaded here.

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