The government is reportedly planning to form a single, mega entity by merging all four state-run insurers - New India, Oriental National, United India and New India Assurance.
According to The Economic Times, contrary to its earlier plan to merge Oriental, National and United Insurance into one entity, keeping New India Assurance separate, the government now thinks having two entities will undercut each other’s business.
“If we first merge the three and then New India acquires this firm… This option can also be looked at,” an official aware of the development was quoted as saying by the newspaper.
The government also is likely to announce infusion of about Rs 4,000 crore in three public sector general insurance companies to shore up their capital.
The capital infusion will help them improve their financial health to an extent that the proposed merger of the general insurance firms could take place, sources said early this month.
The announcement to this effect could be made in the first full-fledged Budget of the Narendra Modi 2.0 government, to be presented in the Parliament on 5 July.
According to sources, the Department of Financial Services will seek around Rs 4,000 crore in the Budget for fund infusion in three insurance companies — National Insurance Company, Oriental Insurance Company and United India Insurance Company.
Depending on the capital that the Budget provides, the individual allocation would be made.
The profitability of many general insurance companies, including that of state-owned ones has been under pressure owing to rising underwriting losses and higher claims.
The two of these public sector companies are struggling to maintain the solvency ratio. As against the insurance regulator Insurance Regulatory and Development Authority's (IRDA) solvency ratio norm of 1.5, National Insurance has an insolvency ratio of 1.5, while United India's level is comparatively lower at 1.21.
The government, in the Budget 2018-19, had proposed to merge National Insurance Company, Oriental Insurance Company and United India Insurance Company.
The then Finance Minister Arun Jaitley in the Budget speech had announced that the three companies would be merged into a single insurance entity.
With PTI inputs
Updated Date: Jun 19, 2019 15:20:44 IST