The Union finance ministry is reportedly considering capital infusion into three public sector general insurance companies—National Insurance Company Ltd, Oriental Insurance Company Ltd, and United India Insurance Company—in the fourth quarter of the current fiscal year. This capital injection would be contingent on the financial performance of these insurers in the first nine months of the fiscal year, according to a report by PTI.
Sources cited in the PTI report revealed that last year, the finance ministry had instructed these insurers to prioritize bottom-line profitability rather than focusing solely on top-line revenue. They were also directed to underwrite only sound insurance proposals.
In the previous fiscal year, the government had provided ₹5,000 crore in capital to support the financial stability of these three insurance companies. National Insurance Company Ltd, based in Kolkata, received ₹3,700 crore, followed by Delhi-based Oriental Insurance Company Ltd (₹1,200 crore), and Chennai-based United India Insurance Company (₹100 crore).
Over the past few fiscal years, the government’s capital infusion has steadily increased: ₹2,500 crore in 2019-20, ₹9,950 crore in the following year, and ₹5,000 crore in 2021-22.
The financial review will provide insights into the impact of the restructuring initiatives on the profitability and solvency margin of these insurers. The solvency margin is a measure of additional capital that insurers must maintain beyond the expected claim amounts to act as a financial safety net during unforeseen situations.
Improving the solvency ratio and meeting the regulatory requirement of 150% is a key priority for the three public sector general insurance companies. The solvency ratio reflects the insurers’ capital adequacy, with a higher ratio indicating better financial health, the ability to meet claims, and the capacity to address future contingencies and business growth plans.
Presently, the solvency ratio of these companies falls below the regulatory requirement of 150%, prompting the finance ministry to explore capital infusion as a means to enhance their financial stability and long-term sustainability.
