An infusion of 4 K crores in PSU non-life firms in budget may happen
The government of India is going to announce the infusion of around Rs 4000 crore in 3 public sector general insurance companies to shore up their capital.
Sources have said that this is going to help them in improving their financial condition to the extent that the proposed merger of the general insurance firms could take place. The Modi government will be presenting this effect in their full- fledge budget in the parliament.
Sources have said that the Department of Financial Services will seek around ?4,000 crore in the budget for infusion of funds in three insurance companies -- National Insurance Company, Oriental Insurance Company, and United India Insurance Company. Besides, the proper allocation would be made but depending on the capital that the budget provides.
The profitability of many insurance companies, including the state-owned, has been consistently under pressure owing to rising underwriting losses and higher claims.
Two public sector companies out of these are struggling to maintain their solvency ratio. According to the insurance regulator of insurance regulatory and development authority (IRDA), the solvency ratio norm is 1.5, whereas the national insurance company is having an insolvency ratio of 1.5 and the federal insurance India company is facing a lower insolvency ratio of 1.21. The government has proposed to merge these three companies in the budget 2018-19.
Mr. Arun Jaitley, finance minister then announced in his speech that these three companies would be merged as a single insurance company. Due to various reasons, including the poor financial condition of these companies, they were not able to complete the merging process.
On the 31st of March, 2017, with all three together these companies had more than 200 insurance products with a market share of around 35% and a total premium of around Rs 41461 crores in the market. They have spread around 6000 offices with a strength of about 44,000 employees and a net worth of Rs 9243 crore.
The company, formed by the merger of these three companies, will be the largest non-life insurance company having worth at Rs 1.2-1.5 lakh crore.