Finance Ministry to Consider Capital Infusion in Three 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 of the past nine months. Sources suggest that if required, the infusion will be made in the fourth quarter of the current financial year.
Last year, the finance ministry directed National Insurance Company Limited, Oriental Insurance Company Limited, and United India Insurance Company to prioritize bottomlines and accept only good proposals.
The financial review will provide insights into the impact of the restructuring efforts on profitability figures and solvency margin, which is the additional capital that the companies must hold for settling all claims.
In 2020, the government provided a capital infusion of Rs 5,000 crore to these insurers. National Insurance Company Limited received the highest amount of Rs 3,700 crore, followed Oriental Insurance Company Limited (Rs 1,200 crore), and United India Insurance Company (Rs 100 crore).
The companies have been instructed to improve their solvency ratio and meet the regulatory requirement of 150 percent, which indicates their capital adequacy and ability to pay claims. Currently, except for New India Assurance, the solvency ratio of the three public sector general insurance companies falls below the regulatory requirement.
Over the years, the government has infused a total of Rs 17,450 crore into these insurance firms to enhance their financial health. The companies are also undergoing various reforms such as organisational restructuring, product rationalisation, cost rationalisation, and digitalisation.
To promote efficient use of capital and drive profitable growth, a set of key performance indicators linked reforms have been introduced all public sector general insurance companies since 2020-21, when the highest capital infusion was made.
Among the four state-run general insurance companies, only New India Assurance Company is listed on the stock exchanges, while the remaining three are fully owned the government. The government has expressed intentions to privatize one general insurance company and has received parliamentary approval for amendments to the General Insurance Business (Nationalisation) Act (GIBNA) to facilitate the process.
In the Budget 2021-22, Finance Minister Nirmala Sitharaman announced a significant privatization agenda, including the privatization of two public sector banks and one general insurance company. Legislative amendments will be required for these initiatives.