News Non-Life11 Dec 2018

India:Over US$800m sought to boost solvency ratios of 3 state-owned insurers

11 Dec 2018

The Department of Financial Services is seeking a capital infusion of INR60bn ($826m) in the three to-be-listed state-owned non-life insurers to shore up their weak solvency position.

The Department made the request for the funds in a letter to the budget division of the Finance Ministry, reported Financial Chronicle citing highly placed sources. The Department wants the INR60bn to be provided for in the Budget for the fiscal year starting 1 April 2019 (FY2020) or as a supplementary demand for grant.

“We have written to the budget division recently for capital infusion of INR2,000 crore each in the three insurance entities that are to be merged. It will de-leverage their not-so-strong balance sheets and raise risk capacities. They need strong balance sheets prior or post merger, but before listing, their books should be strong on the regulatory capital side,” said a source.

The three public sector general insurers are Oriental Insurance, National Insurance and United India Insurance. They will be merged and listed as a mega entity. The minimum required solvency ratio is 1.5. United India has a solvency margin of 1.21 while National Insurance's ratio borders on 1.5.

The merger, announced in the FY2019 Budget in February, will be possible only in FY2020 since the process has just begun and it will require rationalisation of workforce, branches, procedures and software integration, sources said.


 


 

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Recent Comments

Kobjeglavski

India must decide what she wants when she is grown-up. She should give up talking about private enterprise, but shore up state owned companies, which are more or less bucket shops wasting taxpayers' money. Of course it is good to have state owned companies, that is a way to get revenues instead of taxes, but they should act and behave as the private ones. There is no point in pumping fresh capital into these companies, then sell their shares to... other state owned companies (see New India!?!) and they will continue to be governed by state bureaucrats. Once more: you can not have the wife drunk and the barrel full of wine!

11 December 2018

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