The Finance Ministry is considering capital infusion into three loss-making public sector general insurance companies based on their nine-month financial performance. The infusion, if required, would likely take place in the fourth quarter of the current financial year. The insurers in question are National Insurance Company, Oriental Insurance Company, and United India Insurance Company. Last year, the Finance Ministry directed these insurers to focus on the bottom lines rather than the top lines and to underwrite only good proposals.
The financial review will provide insights into the impact of restructuring on profitability and solvency margin. Solvency margin refers to the extra capital that companies must hold beyond expected claim amounts, serving as a financial backup for settling all claims in extreme situations.
The government had infused ₹5,000 crore into these insurers last year—National Insurance Company received ₹3,700 crore, Oriental Insurance Company ₹1,200 crore, and United India Insurance Company ₹100 crore. The companies were tasked with improving their solvency ratio to meet the regulatory requirement of 150%. The solvency ratio is a measure of capital adequacy, and the three public sector general insurance companies, except New India Assurance, had ratios below the regulatory requirement.
Reforms are underway in public sector general insurance companies, including organisational restructuring, product rationalisation, cost rationalisation, and digitalisation. The government has already expressed its intention to privatise one general insurance company and amendments to the General Insurance Business (Nationalisation) Act have been approved to facilitate this move. Finance Minister Nirmala Sitharaman announced the privatisation agenda in Budget 2021-22, including two public sector banks and one general insurance company.
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