Government plans to infuse ₹ 3,000-5,000 crore additional capital in three PSU general insurers

With the aim to improve financial health of the general insurance firms, government plans capital infusion in National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.

May 08, 2022 01:00 pm

An additional capital of ₹3,000-5,000 crore in the three public sector general insurance companies based on their performance and requirement during the year by the government will be a great financial boost. The capital infusion would be largely for — National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.

In the last financial year, the government made capital infusion of Rs 5,000 crore in these three insurance companies. During 2020-21, Rs 9,950 crore was infused in three PSU general insurers by the government out of which Rs 3,605 crore was infused in United India Insurance, Rs 3,175 crore in National Insurance and Rs 3,170 crore in Oriental Insurance.

Fund support was given to the weak general insurance companies last financial year, some more fund requirement is there to bring them back on profitability path, sources said. Capital infusion of Rs 3,000-5,000 crore may be done in these companies based on their performance, sources said, adding, the government has already enhanced their authorised capital keeping further fund infusion in mind.

The three public sector general insurers are short of solvency margin and to improve operational efficiencies an external consultant will be appointed soon. Four public sector firms through General Insurers' Public Sector Association of India or GIPSA have issued a request for proposal (RFP) to reorganise the insurers, and achieve profitability and employee development.

"There is a proposal for restructuring the organisation to bring in profitable growth and employee development through performance management and capability management, in alignment with the Key performance indicators (KPIs) devised by the Public Sector General Insurance Companies (PSGICs)," the RFP said. The last date for submission of bids is June 2, 2022.

Of the four state-run general insurance companies only New India Assurance Company is listed on the stock exchanges; the remaining three are wholly owned by the government. It is to be noted that the government has already announced intention to privatise one general insurance company. To facilitate privatisation, Parliament has already approved amendments to the General Insurance Business (Nationalisation) Act (GIBNA).