Blog, Insurance News

We Will Move Forward On Insurance PSUs Merger: Finance Minister Nirmala Sitharaman


Finance Minister Nirmala Sitharaman has said the government would move forward on the merger of the three state-run general insurance companies as announced in the previous Budget.

“This was a Budget announcement and I will be moving forward on that”, she said in a media interaction.

The proposed merger of National Insurance Co. Ltd., United India Insurance Co. Ltd. and Oriental Insurance Co. Ltd. has not been able to move forward due to their weak financial position, official sources said.

The Budget for 2018-19 had proposed their merger and subsequent listing the merged entity on stock exchanges.

“Citing weak financial positions, these PSUs have sought capital infusion from government. There is a need for immediate recapitalisation in them as per their current balance sheet position where they are either on borderline or below the insolvency ratio. Unless their losses are written off, the merged entity will have a very weak balance sheet”, officials said.

Since the Budget did not make any provision for funds for insurers, the department of financial services (DFS) will have to seek supplementary demand of ₹12,000 crore for this purpose, sources said. 

General insurers have sought around ₹2000 crore to ₹3000 crore each for avoiding falling below solvency ratio, sources said. The three insurers have struggled to maintain the minimum required solvency ratio of 1.5 in recent years. 

According to the guidelines of Insurance Regulatory and Development Authority of India, general insurance companies need to maintain a minimum solvency ratio of 1.50. As on March 31, 2019, the solvency ratio of National Insurance Co. was 1.04 and for Oriental Insurance Co it was 1.57, while solvency ratio for United India Insurance, as on Mar 31, 2018, was 1.54. 

Currently, New India Assurance Co and General Insurance Corp of India Ltd are the only two listed state—owned non—life insurance companies

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *