The Finance Ministry will soon hold a performance review meeting of all state-run insurance companies, including the Life Insurance Corporation.
The review of general insurance companies will set the pace for consolidation, said a Finance Ministry official. The underwriting losses of state-run general insurance firms increased by 43.89% to INR155.91 billion (US$2.41 billion) for the financial year ended 31 March 2017, from INR108.35 billion for the previous year, reported The Economic Times.
Referring to the three unlisted government owned non-life insurers—National Insurance, United India Insurance, and Oriental Insurance—that are to be merged, he said: “We are hopeful that the firms will improve their performance, and we will be able to merge these companies in the next six months and after that we will look at listing.” All the three insurers have already been directed to align their operations in preparation for their merger.
"The Finance Ministry review will also be an opportunity for the three insurers to undertake together a preparatory exercise for the reorganisation of offices and manpower,” said the official.
The government wants the general insurers to contain their underwriting losses. As per the latest report available from the IRDAI, Oriental Insurance and United India Insurance reported a solvency ratio of 1.11 and 1.15, respectively, below the stipulated minimum solvency ratio of 1.50 at 31 March 2017.
“We are evaluating all options as to how the combined entity can be strengthened given that the losses of public sector firms have not come down significantly,” said the Finance Ministry official.
The merger would result in the largest general insurer in India, with a market share of 30%.