The Indian government is considering injecting around INR40bn ($568m) in the next fiscal year commencing on 1 April into three state-run general insurance firms - National Insurance, Oriental Insurance and United India Insurance.
The capital infusion is aimed at improving the solvency of these companies, two of which (barring Oriental Insurance) are struggling to meet the minimum solvency ratio requirement of 1.5, reported Financial Express. United India has a solvency margin of 1.21 and National Insurance's solvency ratio is just around 1.5.
The strengthening of the capital of National Insurance and United India Insurance is deemed necessary before the three state-owned general insurers are merged and later listed.
According to initial estimates, the merged entity will be the largest non-life insurance company in India. The three insurance companies currently command a market share of around 35%.
The INR40bn capital to be injected, as reported by Financial Express, is less than the proposed capital infusion of INR60bn reported by other news organisations last December. Financial Chronicle, citing highly placed sources, had reported that the Department of Financial Services had made a request for the INR60bn in a letter to the budget division of the Finance Ministry,
“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,” a source had said.