Govt to unveil plan to boost PSU general insurers – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/finance/govt-to-unveil-plan-to-boost-psu-general-insurers/articleshow/90364296.cms

Synopsis

The government had proposed a ₹4,950-crore capital infusion in state-run general insurers in the third supplementary demand of grants earlier this month.

The government is soon likely to announce a plan to strengthen state-run general insurance firms, including details of the capital infusion of about ₹5,000 crore that it has already approved.

“An announcement to this effect is expected within this month,” said a government official in the know.

Three of the four public sector general insurance companies are loss-making.

The focus of the plan is expected to be primarily on their loss-making portfolios and improvement in claim management, the official said. Aggressive pricing battles among the four state-run insurers will likely be discouraged.

The government had proposed a ₹4,950-crore capital infusion in state-run general insurers in the third supplementary demand of grants earlier this month.

Numbers That Matter

In the first nine months of the current fiscal year, Oriental Insurance, National Insurance and United India Insurance posted net losses of ₹1,983 crore, ₹679 crore and ₹1,194 crore, respectively. New India Assurance, the only profit-making state-run general insurer, showed a net profit of more than ₹700 crore and will not be getting any capital infusion.

Oriental Insurance had a solvency ratio of 1.4 at the end of March 2021, according to the annual report of the Insurance Regulatory and Development Authority of India.

insurance

The minimum solvency requirement – excess value of assets over liabilities – is 1.50 according to the sector regulator. United India had a solvency ratio of 1.41, while National Insurance had an even lower 0.62. New India Assurance, the healthiest of the four, had a solvency ratio of 1.83.

Further Support Possible
“This restructuring and other operational changes will be driven by the company managements with focus on underwriting losses and the combined ratio (rate of money flowing out of an insurance company). The government will provide all assistance and other regulatory support,” said the government official. “Oriental and United will be the biggest beneficiaries, followed by National Insurance. The government will extend further support if needed,” the official added. An industry executive said the proposed capital infusion would not be of much help, “given a substantial portion will be absorbed in wage revision, which has been put on hold.”

Merger Plan

In 2018-19, the government announced it would merge three public sector insurance companies – Oriental Insurance, National Insurance and United India – and then list the entity on the exchanges, but the plan was shelved as their losses mounted. The government has also said it would privatise one of the general insurance companies but has not named it yet. New India Assurance is listed on stock exchanges. Niti Aayog is reported to have recommended United India for privatisation to the core group of secretaries on disinvestment. The government has notified the General Insurance Business (Nationalisation) Amendment Act, 2021, which will allow the government to cut its stake in state-owned general insurers to below 51%.

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