NEW DELHI: The Cabinet on Wednesday approved infusion of Rs2,500 crore into three State-run general insurance companies, namely Oriental Insurance Company, National Insurance Co and United India Insurance Co. Officials said this would be the first tranche of re-capitalisation of insurance firms.
“We will start recapitalisation of general insurance companies in tranches… The government will infuse more capital as and when required,” Union minister Prakash Javadekar said after the Cabinet meeting.
Javadekar pointed out that the Centre had already infused some Rs3 lakh crore in State-run banks over the last three years, in several tranches. The capital infusion in the three State-run general insurers comes ahead of their proposed merger by the end of March 2020.
Earlier in January, the finance ministry had said that the merger of PSU general insurers was at an advanced stage and that could happen soon as the matter was pending before the Cabinet. In 2018-19, former finance minister Arun Jaitley had proposed a merger of the three insurance companies, and listing of the single entity on domestic bourses.
“Three public sector general insurance companies — National Insurance Company Ltd, United India Assurance Company Limited and Oriental India Insurance Company Limited — will be merged into a single insurance entity and will be subsequently listed,” Jaitley had said in his Budget speech.
“The government is infusing capital into these (insurance) companies so that the solvency ratio becomes acceptable and it fulfils the criteria of IRDA (Insurance Regulatory Development Authority),” Javadekar said.
Officials said another Rs6,950 crore may be infused in these three companies next year. However, the three insurance giants had sought a higher outlay for infusion of funds and the department of financial services within the finance ministry, which oversees them, had suggested an infusion to the tune of Rs12,000 crore. This apparently has been turned down by the finance ministry.
“The infusion of funds was requested so as to maintain IRDA’s solvency margins. Given the many government fiats that we carry out by giving low-cost insurance covers to various sectors, our solvency margins are below IRDA’s requirement of 1.5 per cent,” said the director of a State-run insurance company.
Market share
New India Insurance continues have the highest market share in the general insurance space at 14.28 per cent at the end of January 2020, followed by United India Insurance at 9.19 per cent, National Insurance at 7.67 per cent, and ICICI Lombard at 7.22 per cent.