The Union Budget for the 2018-19 fiscal year (FY2019) presented to the Indian parliament yesterday has proposed the merger of the three public sector general insurance companies, National Insurance, United India Insurance and Oriental Insurance into a single insurance entity prior to being listed on Indian bourses.
Describing the Budget as forward looking and progressive, Mrs Alice G Vaidyan, CMD GIC Re said: “The merger of three PSUs, is a sound proposal but it is the implementation which will be the key to reaping the benefits of the proposal. This will boost the growth prospects of the insurance sector on a sustainable basis and will have a knock-on effect on reinsurance growth as well.”
Mr Ashish Srivastava, MD & CEO, PNB MetLife, described the proposal on “consolidation of the PSU general insurers and the expected listing thereafter as all positive moves for the industry".
Mr Niraj Jain, CEO & Principal Officer of Lambach Insurance Brokers, said: “The merger of Oriental Insurance, National Insurance and United India Insurance is another good move which will not only stabilise the three public-sector units but also the insurance sector as a whole.”
In January 2017, the Indian government had approved the listing of country’s four public-sector general insurance companies and the lone state-run reinsurer GIC Re, with a view to ensure higher levels of transparency and accountability and to gradually bring down the government holding in these companies to 75% from the present 100%.
At that time, however, the solvency ratios of the three public sector general insurers, National, United and Oriental, were below IRDAI mandated levels, hence their public listings were not possible then. As such, the Ministry of Finance in February 2017 proposed to merge these three entities and create a single strong and better entity so as to fetch better valuations at listings.
In June 2017, however, the merger plan of the three public sector insurers was scrapped and they were asked to come up with their business plans.
The three insurers, United, National and Oriental, together have a share of around 34% of the Indian general insurance market and underwrite a total direct premium of over INR34,000 crore ( US$5.3 billion) a year.
Indian reinsurer GIC Re and the fourth Indian public sector general insurance company, New India Assurance, were listed in October and November last year respectively.