The Central government is likely to announce more capital infusion for public sector general insurance companies in the Union Budget 2020-21. The insurers have sought around Rs 10,000 crore to meet the prescribed solvency margin.
“The merger of three insurance companies is already delayed and one of the reasons is their poor financial health. While the government has infused some capital, more capital infusion is expected and the insurers have indicated about Rs 10,000 crore. So, the Budget might see some provisions,” a senior official from the finance ministry said.
In his speech presenting the Union Budget 2018-19, the then finance minister Arun Jaitley had announced merger of three public sector general insurance firms, namely the National Insurance Company, United India Insurance Company and Oriental India Insurance Company, into a single entity.
However, the merger could not be completed due to various reasons, including the poor financial health of these companies.
In July 2019, the Central government extended the timeline for merger of the three companies to 18 months.
Last month, Union Finance Minister Nirmala Sitharaman had infused Rs 2,500 crore into the three insurance companies through first supplementary demands for grants for 2019-20. However, the insurance companies have demanded that they would require an additional dose capital, to the tune of Rs 10,000-12,000 crore, to meet the prescribed solvency margin. The Finance Minister is slated to present her second budget on February 1 this year.
According to the original plan, after the merger, the combined entity will be listed on the bourses. Initial estimates suggest that the combined entity formed after merging of the three insurance companies will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.
As on March 31, 2017, the three companies together had more than 200 insurance products with a total premium of Rs 41,461 crore and a market share of around 35 per cent. Their combined net worth was Rs 9,243 crore, with total employee strength of around 44,000 spread across 6,000 offices.
Rs 2,500 crore infused already
Last month, Union Finance Minister Nirmala Sitharaman had infused Rs 2,500 crore into the three insurance companies through first supplementary demands for grants for 2019-20.
But more needed before merger
However, the insurance companies have demanded that they would require an additional dose capital, to the tune of Rs 10,000-12,000 crore, to meet the prescribed solvency margin.