India’s Finance Ministry is set to evaluate the prospect of capital infusion into three public-sector general insurance companies that have faced financial challenges. The decision regarding the infusion, if deemed necessary, will be considered in the final quarter of the current financial year, according to official sources.
Earlier this year, a government official said that India’s publicly owned insurance companies, including New India Assurance, United India Insurance, Oriental Insurance, and National Insurance Company, are not expected to receive any capital injection as their financial status remains “relatively stable.”
According to a report from The Economic Times, however, three entities 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 impending financial review aims to provide insights into the impact of the restructuring measures initiated by these insurers on their profitability figures and solvency margins. The solvency margin represents the additional capital that companies must maintain beyond their anticipated claim liabilities. It serves as a financial safety net, ensuring the capacity to meet all claim obligations, particularly in exceptional circumstances.
In the previous year, the government had provided a capital infusion of Rs5,000 crore to the three insurers. National Insurance, based in Kolkata, received the highest capital injection of Rs3,700 crore, followed by Delhi-based Oriental Insurance with Rs1,200 crore and Chennai-based United India with Rs100 crore.
Sources indicate that these insurers have been directed to enhance their solvency ratio and adhere to the regulatory requirement of maintaining a minimum of 150%. In line with this, all three public sector general insurance companies, except New India Assurance, have reported solvency ratios below the regulatory threshold.
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