Money & Banking

₹2,500-crore capital boost for three state-owned general insurers approved

Our Bureau New Delhi | Updated on February 12, 2020

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The Union Cabinet on Wednesday gave its in-principle nod for immediate capital infusion of ₹2,500 crore in three state-owned general insurers — Oriental Insurance Company Ltd (OICL), National Insurance Company Ltd (NICL) and United India Insurance Company Ltd (UIICL).

The capital infusion comes ahead of their proposed merger by the end of March. It may be recalled that the Budget had set aside ₹6,950 crore for recapitalisation of the three state-owned general insurers.

The immediate release of ₹2,500 crore is in the light of the critical financial position and breach of regulatory solvency requirements of the three insurers, an official release said. “This fund infusion is being done so that the solvency ratio of the three insurers becomes acceptable as per the Insurance Regulatory and Development Authority of India (IRDAI) norms,” Prakash Javadekar, Minister for Information & Broadcasting and Environment, told reporters after the Cabinet meeting.

“Provision is for higher requirement for maintaining the requisite minimum solvency ratio by each of the three public sector general insurance companies,” the Budget documents said. “The provision is met from the National Investment Fund,” it added.

In December last year, the Centre had infused ₹2,500 crore in the three insurers through the first supplementary demand for grants for 2019-20. There have been expectations of more capital infusions to improve their solvency ratio.

The recapitalisation move will not only help improve their solvency ratio but is also expected to help fast-track their merger process, experts said.

In Union Budget 2018-19, former Finance Minister late Arun Jaitley had announced that the three companies would be merged into a single entity and then listed. However, the merger process could not be completed due to various reasons, including poor financial health of these companies.

IRDAI data had also revealed that state-run general insurers, barring Oriental Insurance, had ceded market share to their private sector peers in 2018-19.

Published on February 12, 2020

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