New India Assurance under government scanner for over Rs 421 crore loss

NEW DELHI: The government is looking into the affairs of the country's largest general insurance firm, New India Assurance, after the firm posted a net loss of Rs 421 crore in 2010-11.

"It's a matter of concern that a public sector firm is reeling under losses. Naturally, an explanation needs to be provided," a senior government official told ET.

The company has posted losses for the first time in 90 years of its operations.

A senior official with New India Assurance confirmed to ET that the finance ministry has also sought explanation over the losses made by the insurer. He, however, said it was a normal process.

"We have already made the presentation to the board. We have a senior finance ministry official, and head of a public sector bank on our board," the official said.

"About Rs 300 crore of the loss was from international operations." Department of economic affairs Secretary R Gopalan is on the company's board.

"We were re-insures for some companies in Australia and New Zealand, both countries suffered from natural disasters in form of floods and earthquake," he said.

A finance ministry official also confirmed to ET that the government has expressed its concern over the losses posted by New India Assurance.

E-mails sent to New India Assurance remained unanswered till the time of filing this story.

The company's chairman and managing director M Ramadoss is already under an investigation by the Central Bureau of Investigation for irregularities in distribution of credit insurance cover to Paramount Airways.
Ramadoss was the CMD of Oriental Insurance when the credit insurance cover to Paramount Airways was approved.

A CBI official confirmed to ET that the investigation in Paramount Airways case is on. "But we are not looking into other financial transactions that have been or are approved by Ramadoss," the official clarified.
A senior official with Oriental Insurance said the company has not made any losses on Paramount's Account. "The policy had come for renewal in April 2010. We had apprehensions on the underwriting judgment and risk factors and hence decided to cancel the policy," the official clarified. The official further said the investigation agency has not approached the company and the enquiry is being carried out at the level of individuals. "If the finance ministry asks us for explanation, we will provide," he said.