Government to inject funds into public sector insurers

The three state-run general insurers in India namely National Insurance, Oriental Insurance and United India Insurance will be injected with funds worth INR120bn($1.67bn) to boost their capital base and meet regulatory norms, reported Indo-Asian News Service citing unnamed sources.

India’s nodal Department of Financial Services has approved the capital infusion plan for the public sector insurance companies after plans to merge them could not be completed due to various reasons including their severely weak financial conditions.

In order to be listed, the insurers were required by Insurance Regulatory and Development Authority of India (IRDAI) to have a 1.5 solvency ratio, which is a major financial metric used to measure a company's ability to meet its debt obligations. Unfortunately, two of the insurers are struggling to maintain their solvency ratio and do not meet this requirement.

The merger of public sector general insurers is part of the disinvestment strategy of the government and EY was appointed as a consultant to pursue the completion of the merger process. According to sources, the government needed to infuse INR120bn to INR130bn in these three insurers to improve their solvency ratio and prepare them for the merger. It is said that the three insurers will be merged after the capital infusion and after the merger, the entity will be the largest insurer in India.

Source: Asia Insurance Review