Merger of three PSU General Insurers:MoF to meet chiefs of PSU general insurerance Cos on Feb 16
Subhas Chander Garg, Economic Affairs Secretary, Ministry of Finance, immediately after the Budgetary announcement had said the government will be completing merger of three public sector general insurers in FY 2018-19 and will list the new entity during the year.
Government seems to be losing no time for kick starting the process to merge the three public sector general insurers- United India Insurance, Oriental Insurance Company and National Insurance company-.as announced by Finance Minister Arun Jaitley in his Budget -2018 last week.
After the Budgetary announcement, the ministry of finance has called for a meeting of CMDs of three general insurers on Feb 16 in New Delhi to initiate the process of merger that would create the largest general insurer in the country with over 30 per cent of market share.
``We have been called for a meeting in New Delhi. Though, we are not aware of the details of the meeting, it will be the proposed merger that would be discussed. Merger will have a lot of complications not only in terms of rationalisation manpower and offices of three companies also in the legislative processess as the relevant Act(General Insurance Business (Nationalization) Amendment Act of 2002.) has to be amended before merger takes place.’’ said a CMD of a PSU general insurers who didn’t want to be named.
Earlier Subhas Chander Garg, Economic Affairs Secretary, Ministry of Finance, immediately after the Budgetary announcement said the government will be completing merger of three public sector general insurers in FY 2018-19 and will list the new entity during the year.
MN Sarma, CMD, UII had commented that as of now all the three companies put together have got 90 regional offices which will now come down to 30 post the merger. Requirement of staff will also come down and thus there may be 10,000-15,000 excess staff out of nearly 45,000 staff currently working in the industry.
K Sanath Kumar, CMD, NIC had said though the merger will result in the making of a very stronger company with higher enterprise value and a good synergy, it depended on speed as to how long it would take to complete the process.
Alice Vaidyan, CMD, GIC Re.had noted that the merger proposal of three insurance PSUs is a sound one but it is the implementation which will be the key to reaping the benefits of the proposal, said Alice Vaidyan, CMD, GIC Re..
After the completion of the merger of the three companies, the country will see the largest general insurer with over Rs 40,000 crore of premium and having a market share of over 30 per cent.
New India Assurance,another public sector company, is currently the largest non-life player in the country with around Rs 22,000 crore of premium and 15 per cent of market share.
Laws regarding PSU General Insurance Companies
The entire general insurance business in India was nationalized by the Government of India (GOI) through the General Insurance Business (Nationalization) Act (GIBNA) of 1972. 55 Indian insurance companies and 52 other general insurance operations of other companies were nationalized.
The General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA. It was incorporated on 22 November 1972 under the Companies Act, 1956 as a private company limited by shares. GIC was formed to control and operate the business of general insurance in India.
The GOI transferred all the assets and operations of the nationalized general insurance companies to GIC and other public-sector insurance companies. After a process of mergers and consolidation, GIC was re-organized with four fully owned subsidiary companies: National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.
GIC and its subsidiaries had a monopoly on the general insurance business in India until the landmark Insurance Regulatory and Development Authority Act (IRDA Act) of 1999 came into effect on 19 April 2000. This act also amended the GIBNA Act and Insurance Act of 1938. The act along with the amendments ended the monopoly of GIC and its subsidiaries and liberalized the insurance business in India.
In November 2000, GIC was notified as India's Re insurer, but its supervisory role over its subsidiaries was ended. This was followed by the General Insurance Business (Nationalization) Amendment Act of 2002. Coming into effect from 21 March 2003, this amendment ended GIC's role as a holding company of its subsidiaries. The ownership of the subsidiaries was transferred to the Government of India.
As a result of these reforms, GIC became the sole Re-Insurer in India, and is now called GIC Re.