The Government has recently infused capital in these three general insurers and stands committed to provide more capital, as may be required, said an “office memorandum” signed by Mandakini Balodhi , director(Insurance), MoF.

High solvency ratio makes three of the four public sector general insurance companies (PSGICs) namely, National Insurance Company, Oriental Insurance Company and United India Insurance Company, ineligible to participate in the tender process

New Delhi:

Ministry of Finance has said the government stands committed to provide more capital to three public sector general insurers, National Insurance Company(NIC), Oriental Insurance Company (OIC) and United India Insurance (UII) as may be required and has asked Central Public Sector Enterprises (CPSEs) and government departments not to include the requirement of minimum solvency ratio of 1.5 as one of the eligibility criteria for these insurers’ for their participations in government tenders.

The Government has recently infused capital in these three general insurers and stands committed to provide more capital, as may be required, said an “office memorandum” signed by Mandakini Balodhi , director(Insurance), MoF.

Further according to the ministry, the stipulation on high solvency ratio makes three of the four public sector general insurance companies (PSGICs) namely, NIC ,OIC and UII, ineligible to participate in the tender process in-spite of their vast experience and risk management skills.

Only New India Assurance has reported a solvency ratio of more than 1.5.

While it is agreed that solvency margin is a good measure to assess the financial health and stability and the ability of insurers to meet the liability, it is important to note that the insurance sector is duly regulated by Insurance Regulatory and Development Authority of India (IRDAI), said the ministry’s note.

IRDAI has also allowed forbearance (from maintaining required solvency ratio) to these companies considering all aspects and allowed them to continue underwriting business as usual, notification said.

It is pertinent to note that the reinsured liability is not factored into calculation of Solvency Ratio, specified by IRDAI, as a result of which the solvency ratio of 1.5 is very high from a risk perspective, the ministry said.

Further, public sector general insurance companies have not defaulted ever on their liabilities, it said.

“It is requested not to include solvency ratio as a criterion for participation of public sector general insurance companies in general insurance tenders. This would enhance competition in the bidding process without compromising on the quality of services. It is also requested to bring this to the attention of all the procuring entities and organisations under the administrative jurisdiction of your ministry or department,” the ministry said.