Finance Ministry to Consider Capital Infusion in Public Sector General Insurance Companies
New Delhi – The Finance Ministry is reportedly considering capital infusion in three loss-making public sector general insurance companies based on their financial performance for the first nine months of the current financial year. Sources indicate that the infusion, if required, will be made in the fourth quarter.
Last year, the finance ministry had instructed the three insurers – National Insurance Company Limited, Oriental Insurance Company Limited, and United India Insurance Company – to focus on bottomlines and underwrite only good proposals.
The financial review will assess the impact of restructuring on profitability and solvency margin. The solvency margin, which represents extra capital held by the companies to settle all claims, must exceed the expected claim amounts.
In the previous year, the government provided a capital injection of Rs 5,000 crore to the three insurers. National Insurance Company Limited received the highest amount of Rs 3,700 crore, followed by Oriental Insurance Company Limited with Rs 1,200 crore, and United India Insurance Company with Rs 100 crore.
The companies have been instructed to improve their solvency ratio and meet the regulatory requirement of 150 percent, which measures capital adequacy and financial health.
Apart from New India Assurance, the solvency ratio of the three public sector general insurance companies fell below the regulatory requirement.
In the past three years, the government has infused a total of Rs 17,450 crore into these firms to enhance their financial well-being. These companies are currently undergoing reforms such as organisational restructuring, product rationalisation, cost rationalisation, and digitalisation.
To drive profitable growth and efficient capital utilization, key performance indicator-linked reforms have been implemented by all public sector general insurance companies since 2020-21.
Of the four state-run general insurance companies, only New India Assurance Company is listed on the stock exchanges, while the remaining three are entirely government-owned.
The government has expressed its intention to privatise one general insurance company and has obtained the necessary amendments to the General Insurance Business (Nationalisation) Act (GIBNA) from Parliament.
In the Budget 2021-22, Finance Minister Nirmala Sitharaman announced plans to privatise two public sector banks and one general insurance company, acknowledging the need for legislative amendments.
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