Vivek Joshi, secretary, Department of Financial Services(DFS), recently had reviewed the functioning of the four PSU general insurers in New Delhi but the pressing issue of the capital infusion was out of meeting’s agenda
The three PSU general insurers that require capital infusion to improve their solvencies are , United India Insurance, Oriental Insurance and National Insurance Company. Three companies last year had asked for around Rs 14,000 crore capital from the government to improve their solvencies which have deteriorated further in fY23.
New Delhi:
Though, there is an urgent need of capital infusion by the government into the three out of four public sector general insurance companies, it is unlikely that it will happen in the current fiscal, a senior official said.
The three PSU general insurers that badly require capital infusion to improve their solvencies are, United India Insurance(UII), Oriental Insurance Company(OIC) and National Insurance Company(NIC). These three companies last year had asked for around Rs 14,000 crore capital from the government to improve their solvencies which have deteriorated further in fY23.
Vivek Joshi, secretary, Department of Financial Services(DFS), recently had reviewed the functioning of the four PSU general insurers in New Delhi but the most pressing issue of the capital infusion into three PSU general insurers was out of the agenda.
Currently, out of four general insurance companies in India — New India Assurance(NIA), UII, OIC and NIC, only NIA, with a solvency of 1.85 as on 30th June, 2023 is better placed than the rest which have solvencies of less one per cent as on 31st March,2023.
The capital requirement of three PSU general insurers (excluding New India) is estimated at a sizeable Rs 17,200-17,500 crore to meet solvency of 1.50x as of March 2024, assuming 100 per cent forbearance on FVCA (fair value change account), ICRA said in a report in May.
NIA, which has doubled its profit to Rs 260 crore in Q1FY 24,is likely to give a dividend to the government in the current fiscal and they will be able to meet their solvency margins, said the official.
The government last year provided Rs 5,000 crore capital to three insurers –NIC , OIC and United India Insurance (UII).
The Budget 2023-24 has not provided for the capital infusion for insurance companies.
”We do not think there is a need for capital infusion as of now. In fact, one of the general insurance companies may give a dividend this year,” the official said.
Insurance companies are mandated by regulator IRDAI to maintain extra capital over and above the claim amounts they are likely to incur. It acts as a financial backup in extreme situations, enabling the company to settle all claims.
According to rating agency ICRA, most PSU insurers are expected to witness a high combined ratio resulting in net losses during the current fiscal , though it will be lower compared to the last few years.
During 2020-21, Rs 9,950 crore was infused in three public sector general insurers by the government, out of which Rs 3,605 crore was infused in UII, Rs 3,175 crore in NIC and Rs 3,170 crore in OIC.