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C. Shivkumar

Bangalore , Aug. 24

TRADE unions have sought the merger of the four public sector non-life insurance companies into a single entity on the lines of the Life Insurance Corporation of India. The National Confederation of General Insurers Officers Association and the All India Insurance Employees Association have initiated the move. These unions control over 70 per cent of the 68,000-strong workforce.

Sources said the merger move had also received support from the Left parties, which control the non-officer unions.

Incidentally the Malhotra committee, which submitted its report in the 1990s, had also favoured the merger of the four companies. The officer's union when contacted said, "Our demand is consistent with the committee recommendations."

The merger proposal was, however, not favoured by the A F Ferguson, consultants for restructuring the four companies - New India Assurance Company Ltd, United India Insurance Company Ltd, National Insurance Company Ltd and Oriental Insurance Company Ltd. The consultants favoured preserving the existing structure of the companies.

The NDA government had also initially considered the proposal of merging the four entities after transferring of equity from the General Insurance Corporation. This proposal was, however, kept on hold since the focus was then to clean up the balance sheets of the four companies and carry out industry level reforms before the merger. The balance sheet clean-up has already been completed and all the four companies have fully provisioned their liabilities, especially unexpired risks. Industry-level reforms are expected to be completed by April 2005, when motor insurance would be fully detariffed.

The merger proposal has, however, triggered nervousness among the private sector players. The opposition partly due to hopes by some of the private sector insurers to buy out one of the public sector companies, when offered for divestment. A merger completely upsets such ambitions, the sources said. The combined capital of the four PSU insurers companies would be in excess of Rs 11,000 crore and the asset size would be in the region of about Rs 30,000 crore.

Such a large a capitalisation would mean that the merged entity would be in a position to secure better terms in the reinsurance markets in view of the high retention capacity. Moreoverthe PSU insurers would be in a position to push premiums down in a detariffed regime.

More Stories on : General Insurance | Trade & Labour Unions

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