India’s finance ministry will examine the prospect of a capital infusion into three public sector general insurance companies that are facing financial challenges. The decision on the infusion, if deemed necessary, will be taken in the last quarter of the current financial year, official sources said.
Earlier this year, a government official said that India’s public sector insurers, including New India Assurance, United India Insurance, Oriental Insurance and National Insurance Company, are not expected to receive any capital infusion as their financial position remains “relatively stable”.
However, according to a report, three companies are now under scrutiny: National Insurance, Oriental Insurance and United India. Last year, the finance ministry had advised these insurers to prioritise their bottom lines and focus on underwriting only sound proposals.
The forthcoming financial review is expected to provide insights into the impact of the restructuring measures initiated by these insurers on their profitability ratios and solvency margins. The solvency margin represents the additional capital that companies must hold above their expected claims liabilities. It acts as a financial safety net, ensuring the ability to meet all claims obligations, particularly in exceptional circumstances.
Last year, the government provided a capital infusion of Rs 5,000 crore to the three insurers. Kolkata-based National Insurance received the highest capital infusion of Rs 3,700 crore, followed by Delhi-based Oriental Insurance with Rs 1,200 crore and Chennai-based United India with Rs 100 crore.
According to sources, these insurers have been directed to improve their solvency ratio and meet the regulatory requirement of maintaining a minimum of 150%. In line with this, all three public sector general insurers, except New India Assurance, have reported solvency ratios below the regulatory threshold.
