Union Budget 2020-21: Nirmala Sitharaman may announce second round of capital infusion for non-life insurers

Finance Minister Nirmala Sitharaman may announce second-round capital infusion for public sector general insurance companies in the upcoming Budget to improve their financial health

Press Trust of India January 13, 2020 12:52:35 IST
Union Budget 2020-21: Nirmala Sitharaman may announce second round of capital infusion for non-life insurers
  • The government infused Rs 2,500 crore in the three insurers -- National Insurance, Oriental Insurance and United India Insurance -- through first supplementary demands for grants for 2019-20 last month

  • However, these companies would require additional Rs 10,000-12,000 crore capital dose to meet the prescribed solvency margin

  • The capital infusion will not only improve their financial health but facilitate merger announced in the Budget 2018-19

New Delhi: Finance Minister Nirmala Sitharaman may announce second-round capital infusion for public sector general insurance companies in the upcoming Budget to improve their financial health.

The government infused Rs 2,500 crore in the three insurers -- National Insurance, Oriental Insurance and United India Insurance -- through first supplementary demands for grants for 2019-20 last month.

However, these companies would require additional Rs 10,000-12,000 crore capital dose to meet the prescribed solvency margin, sources said.

The sources further said that announcement to this effect can be made in the Budget 2020-21 that is scheduled on 1 February.

Union Budget 202021 Nirmala Sitharaman may announce second round of capital infusion for nonlife insurers

File image of finance minister Nirmala Sitharaman. PTI

The infusion will not only improve their financial health but facilitate merger announced in the Budget 2018-19.

In the Budget 2018-19 speech, then Finance Minister Arun Jaitley had announced that the three companies would be merged into a single insurance entity.

However, the process of merger could not be completed due to various reasons, including the poor financial health of these companies. According to the sources, after the merger, the combined entity will be listed on the bourses.

Initial estimates suggest that the combined entity formed by merging the three insurers will be the largest non-life insurance company in India, valued at Rs 1.2-1.5 lakh crore.

As on 31 March, 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 percent.

Their combined net worth was Rs 9,243 crore, with total employee strength of around 44,000 spread over 6,000 offices.

In 2017, state-owned New India Assurance Company and General Insurance Corporation of India were listed on the bourses.

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