Watchdog Calls For Stronger Powers After Dividend Defiance

By Najiyya Budaly
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Law360, London (October 13, 2020, 12:29 PM BST) -- Europe's insurance watchdog has called for strengthened powers to ensure that member states follow consistent rules after insurers and supervisors across the bloc defied the authority by failing to take a common approach to dividends during the coronavirus crisis.

Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, said the watchdog was focused on coordinating the actions of supervisors after the COVID-19 outbreak. But national regulators took differing approaches to supervising their country's insurers after EIOPA advised that they should suspend payment of dividends to strengthen their capital positions.

Bernardino told the European Parliament that this resistance demonstrates that EIOPA needs tougher supervisory powers.

"We have seen some differences in approaches by market players and also by some supervisors," the chairman told the Economic and Monetary Affairs Committee on Monday. "This is a clear issue for the level playing field in the internal market, especially in a crisis, and it is a lesson that should encourage the strengthening of EIOPA's powers."

But Bernardino added that insurers entered the pandemic with robust capital positions and "overall have maintained comfortable solvency ratios."

The EU regulator urged insurance companies in April to halt dividends, buybacks and bonuses during the coronavirus outbreak. EIOPA told insurers at the time to preserve their capital holdings so they can pay out to policyholders and protect themselves during the outbreak.

But major European insurers pressed ahead with making dividend payments to their shareholders. Munich Re, Legal & General and Allianz all set out plans to defy the guidance, and their national supervisors failed to intervene.

The Bank of England indicated its support for the watchdog's guidance when Prudential Regulation Authority chief Sam Woods wrote to the boards of insurance companies urging them to be prudent with dividends and bonuses and to look after policyholders.

British lenders including Barclays and HSBC were forced to stop paying out dividends. But the central bank took a slightly softer stand with insurers, stopping short of telling them to scrap the payments altogether.

--Additional reporting by Joanne Faulkner. Editing by Ed Harris.

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