Centre may infuse Rs 5,000 crore capital in three general insurers

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Three loss-making general insurance companies –National Insurance Co, Oriental Insurance Co and United India Insurance—may collectively require capital infusion to the tune of Rs 5,000 crore.

After the capital infusion, the Centre will look at listing National Insurance and Oriental Insurance on the stock exchanges, according to a report in The Economic Times.

The finance ministry will take the final decision on capital infusion needed to meet the regulatory requirements.

NITI Aayog’s recommendations

NITI Aayog, Centre’s public policy think-tank, has suggested that United India Insurance, along with two state-run banks, should be privatised. These recommendations have been sent to the core group of secretaries on disinvestment which is headed by cabinet secretary Rajiv Gauba.

The General Insurance Business (Nationalisation) Amendment Act which was notified in the previous week will allow the government to slash its stake in state-owned general insurers to under 51%.

Last year, the government had infused Rs 12,450 crore in National Insurance, Oriental Insurance and United India Insurance.

Insurers battling losses

In FY21, Oriental Insurance reported a loss of Rs 1,525 crore and it’s Gross Direct Premium contracted by 9%. The insurer’s solvency ratio now stands at 1.52.

The financial results of National Insurance and United India Insurance for FY21 are yet to be made public. But according to disclosures submitted to the Insurance Regulatory and Development Authority of India (IRDAI), National Insurance had posted a net loss of Rs 4,627 crore in FY21 with a solvency ratio of 1.21.

In FY20, United India reported a net loss of Rs 1,485 crore with a solvency ratio of 0.30. The collective losses of National and United Insurance could be close to Rs 5,000 crore and this may further have an effect on their respective solvency ratios, as per the media report.