The government will review the need for any capital infusion in the public insurers only next year, the official said
Public insurance companies including New India Assurance, United India Insurance, Oriental Insurance and National Insurance Company, are unlikely to get any capital infusion by the Union government in the current FY24, a senior finance ministry official said.
“No capital infusion is needed in non-life public insurance companies at least in this fiscal. Their financial condition is not so bad. They are sustaining. In fact, one of the insurance companies will also give a dividend to the government in FY24,” he said.
The government will review the need for any capital infusion in the public insurers only next year, the official added.
The state-owned public sector undertakings (PSUs) offer a dividend to the government, which is a percentage of their profit after tax (PAT).
There were reports earlier that the finance ministry is planning an additional capital infusion of Rs 3,000 crore this fiscal in the three loss-making public sector general insurance companies to improve their solvency ratio and meet the regulatory requirement of 150 percent.
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 margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur. It acts as a financial backup in extreme situations, enabling the company to settle all claims.
Of the four state-run general insurance companies only New India Assurance Company is listed on the stock exchanges, the remaining three are wholly owned by the government.
The government in FY22 provided Rs 5,000 crore capital to three insurers, namely, National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.
Kolkata-based National Insurance Company Limited was given the highest Rs 3,700 crore, followed by Rs 1,200 crore to Delhi-based Oriental Insurance Company Limited, while Chennai-based United India Insurance Company got Rs 100 crore.
During 2019-20, the government infused Rs 2,500 crore in these three companies. It increased substantially to Rs 9,950 crore in the following year and Rs 5,000 crore in 2021-22.
Finance Minister Nirmala Sitharaman in the Budget 2021-22 announced to privatise a general insurance company, which is still pending.
Source: https://shorturl.at/bdzP9
