Three state insurers may get Rs 5,000-cr infusion for revival

The government may delay a planned privatisation of state-run general insurers, focusing instead on strengthening the three insurers-Oriental Insurance Co. Ltd, National Insurance Co. Ltd, and United India Insurance Co. Ltd-through capital support and business revival plans.

It is expected to infuse about ₹5,000 crore into the three insurers, shelving any privatisation plan this fiscal, said officials aware of the development. "Deliberations have been held with all stakeholders, and an announcement regarding capital support is expected in the upcoming budget," one of the officials said. He said the final amount may vary but the government is committed to supporting the general insurers to further strengthen their balance sheets.

Solvency ratio for the three insurers remained at about 0.58 as of December 2023, compared to the regulatory requirement of 1.50 times. The solvency ratio is the excess of capital and the value of assets over the insured liabilities. It indicates the buffer an insurer has to settle all claims in extreme situations.

According to a report from rating agency ICRA, the capital requirement of three PSU general insurers (excluding New India) is estimated at ₹9,400-₹10,020 crore to meet solvency of 1.50x as of March 2025, assuming 100% forbearance on the fair value change account, or FVCA. So far, the government has infused ₹17,500 crore in these insurers.

Latest data shows the market share of public sector general insurers fell to 31.18% in FY24 from 32.27% in the year before. The share of private insurers rose to 53.52% from 51.36% during the period.

The ICRA report also pointed out that the combined ratio for PSU insurers, though expected to be lower, will remain weak, impacting net profitability.

"We don't expect any privatisation in FY25. This year, the focus will be to strengthen them and regain lost market share through efficient business planning," a second official said, requesting anonymity.

Since 2021, when the Centre notified the General Insurance Business (Nationalisation) Amendment Act, which allows the government to pare its stake in state-run general insurers to below 51%, there has been no movement on the privatisation front.

"While the government is committed to its privatisation policy, in this case, we will only start the process when the insurers are financially strong," said the official cited above.

An industry executive said there were expectations of the government pushing for privatisation of state-run insurers in view of the Insurance Amendment Bill slated to be tabled this year, which will further liberalise the domestic insurance market.