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The government may infuse ₹3,000-5,000 crore additional capital in the three public sector general insurance companies based on their performance and requirement during the year, sources said. The capital infusion would help improve the financial health of the general insurance firms — National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.
In the last financial year, the government made a capital infusion of ₹5,000 crore to these companies. During 2020-21, ₹9,950 crore was infused, out of which ₹3,605 crore to the United India Insurance, ₹3,175 crore for National Insurance and ₹3,170 crore in Oriental Insurance.
Fund support was given to the weak general insurance companies last financial year, and some more are needed to bring them back on the profitability path, sources said. Capital infusion of ₹3,000-5,000 crore may be disbursed based on their performance, sources said, adding that the government has already enhanced their authorised capital keeping further fund infusion in mind.
Request for proposal
The three public sector general insurers are short of solvency margin and to improve operational efficiencies an external consultant will be appointed soon. Through General Insurers' Public Sector Association of India (GIPSA), four public sector firms have issued a request for proposal (RFP) to reorganise the insurers, and achieve profitability and employee development.
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"There is a proposal for restructuring the organisation to bring in profitable growth and employee development through performance management and capability management, in alignment with the Key performance indicators (KPIs) devised by the Public Sector General Insurance Companies (PSGICs)," the RFP said.
The last date for submission of bids is June 2, 2022. Only New India Assurance Company is listed on the stock exchanges; the remaining three are wholly owned by the government.
Privatisation plans
It is to be noted that the government has already announced its intention to privatise one general insurance company. To facilitate privatisation, the Parliament has already approved amendments to the General Insurance Business (Nationalisation) Act (GIBNA).
Finance Minister Nirmala Sitharaman, in the Budget 2021-22, had announced a big-ticket privatisation agenda, which included two public sector banks and one general insurance company. "We propose to take up privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments," she had said at the time.
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