India may infuse more capital in 3 general insurers before listing

The government may infuse more capital in three loss-making, state-owned general insurers to help them meet regulatory requirements and prepare them for listing and privatisation.

Initial estimates suggest these companies--National Insurance Co. Ltd, Oriental Insurance Co. Ltd and United India Insurance Co. Ltd--together need about ₹5,000 crore.

The finance ministry will take a call on the actual infusion.


The government will consider the stock exchange listing of National Insurance and Oriental Insurance after the capital infusion, an official aware of developments told ET.

NITI Aayog has recommended United India Insurance for privatisation to the core group of secretaries on disinvestment headed by the cabinet secretary, along with two state-run banks.

“An assessment will be done based on the projections provided by these insurers. Some money may be infused to further strengthen before privatisation,” said the official citied above. Initial estimates based on the assessment of insurers peg the capital requirement at about ₹5,000 crore, he said.

The General Insurance Business (Nationalisation) Amendment Act, notified last week, will allow the government to cut its stake in state-owned general insurers to below 51%. The government infused ₹12,450 crore in these three companies last year.

National, United Losses Pegged at ₹5,000 Crore
“Despite this, their performance hasn't improved and it is expected that they may require some more capital,” the official said.

Oriental Insurance reported a loss of Rs 1,525 crore in FY21. The insurer's gross direct premiums shrank 9% and its solvency ratio stands at 1.52.

The FY21 financial results of National Insurance and United India Insurance haven’t been made public. But as per disclosures to Insurance Regulatory and Development Authority of India (IRDAI), National Insurance’s solvency ratio up to the quarter ended March 31 stood at 1.21% and its losses stood at Rs 4,627 crore in the last fiscal year. In FY20, United India posted a loss of Rs 1,485 crore and had a solvency margin of 0.30.

“The combined losses for National and United Insurance are expected to be around Rs 5,000 crore,” said an executive at United India Insurance, which may further impact the solvency ratio.

The solvency margin–the excess of the value of assets over that of insurance liabilities–is like a bank’s capital ratio.

As per IRDAI, all insurance companies need to maintain a surplus of 1.5 times their liabilities at all times. The regulator has given special dispensation to state-owned general insurers for solvency requirements. The finance minister had announced the government's intent to take up two public sector banks and one general insurance company for privatisation in her FY22 budget speech.