The Union finance ministry may consider capital infusion in three loss-making public sector general insurance companies — National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company — in the fourth quarter of the current fiscal year, a report by PTI said on Sunday.
The capital infusion would be based on the financial performance of the general insurers in nine months, the report also said.
According to the PTI report citing sources, the finance ministry last year asked three insurers to chase bottomlines rather than topline and underwrite only good proposals.
Last year, the government had provided ₹5,000 crore capital to National Insurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company.
Kolkata-based National Insurance Company was provided ₹3,700 crore, followed by Delhi-based Oriental Insurance Company ( ₹1,200 crore) and Chennai-based United India Insurance ( ₹100 crore).
During fiscal year 2019-20, the government infused ₹2,500 crore in these three companies. In the following year, it increased substantially to ₹9,950 crore and ₹5,000 crore in fiscal year 2021-22.
“The financial review would give some idea about the impact of restructuring initiated on the profitability numbers and the solvency margin,” said the report.
The solvency margin, the extra capital the companies must hold over and above the claim amounts they are likely to incur, acts as a financial backup in extreme situations.
The three general insurers have been asked to improve their solvency ratio and meet the regulatory requirement of 150%.
The solvency ratio is a measure of capital adequacy. A higher ratio reflects better financial health and the ability of the company to pay claims and meet future contingencies and business growth plans.
The solvency ratio of the three public sector general insurance companies is below the regulatory requirement of 150%.
“Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!
Download The Mint News App to get Daily Market Updates.
More
Less
Updated: 22 Oct 2023, 05:21 PM IST
