The other two can be provided additional capital to strengthen their balance sheet, the above mentioned on the condition of anonymity. To start, the government will assess the financial performance of all three insurers in the upcoming quarters.
The person said, “The purpose is to strengthen the balance sheet of general insurers through recapitalization before considering any possible merger.”
While National Insurance, United India Insurance and Oriental India Insurance are considered weak, market leader New India Assurance is seen as strong and not candidates for privatization.
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The Union Budget 2018-19 proposed to merge three weaker insurers into one and list it on stock exchanges, a plan that has made very little progress. Federal Think Tank Niti Aayog recommended United India Insurance to privatize a panel of a secretary in FY22, but was also not taken.
PSU performance
At the end of the September quarter, the solvency ratio of National Insurance, Oriental Insurance and United India Insurance stayed at -0.45, -1.02 and -0.71 respectively, while New India Assurance was at 1.81. The insurance regulator makes all insurers mandatory to maintain a minimum solution ratio of 1.5. This ratio measures the ability of an insurer who serves the risks he has. According to the other person mentioned above, all PSU insurers are expected to have a positive ratio after an expected capital infusion.
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“While the Center had previously sought exemption from India’s Insurance Regulatory and Development Authority (IRDAI) to complete the regulatory-sovereign margin for all three institutions, capital infusion could be made to further strengthen them,” the person said. “After assessing the performance of these companies in these companies, a call can be taken on privatization,” the person said.
Querry was unanswered by the Finance Ministry spokesman and the Secretary of the Department of Financial Services.
On 16 December, Mint Told that the government can consider a capital infusion 4,000–5,000 crore solvency issues are facing 4,000–5,000 crore solvency issues in the state-owned general insurers, based on improvement in their financial health.
To ensure this, market leader New India Assurance reported net profit 1,129 crore in FY24 and 73.56 crores in FY25’s Q2. United India Insurance Company reported a profit Q2, FY25, and 45.43 Crore in Loss of 803.71 crores in FY24. Oriental Insurance reported a profit Q2, FY25, and 210.82 Crore in 18.61 crore profit in FY24. National Insurance Company reported a profit Q2, 81 crores in FY25, after reducing its loss 187 crores in FY24.
CR Vijayan, former General Secretary of the Industry Body General Insurance Council, said, “The plan to privatize a general insurance company is a good but impractical idea as any public sector bank has not yet been privatized. Even IDBI Bank is still in the hands of the government/LIC.”
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He said, “An advantage was the number of their offices with public sector general insurance companies. But, about half of them has been closed. They (like banks) repetitive to them and then merge them (like banks),” he suggested.
To ensure this, privatization of insurance companies is expected to be more straight, as Parliament has already amended the General Insurance Business Nationalization Act, enabled the government to reduce its stake in a general insurer less than 51%. This is contrary to privatization of public sector banks, which requires amendment of the first Banking Regulation Act.
Insurance market
India’s general insurance market consists of 27 companies, including four major public sector undertakings, 23 private insurers and six standalone health insurance providers.
Despite the sector size, India’s insurance density (per capita premium) is approximately $ 95, much lower than the global average of $ 889. Similarly, insurance penetration in India is 3.7%, compared to the global average 7%.
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While negative solvency is going on in the public sector, despite the insurers inhibit their social impact 17,450 crore between FY20 and FY22, Capital Infusion alone is a band-ed; Rajiv Saxena, partner-audit, SN Dhawan and Company LLP stated that structural reforms, operational efficiency and cost adaptation are essential for long-term stability.
He said, “To strengthen the public sector insurers, the government can provide immediate capital infusion related to operational reforms and cost adaptation. Can bring strategic disinvestment or privatization to expertise and can do a large extent to a large extent for financial good and development without unloading social responsibility, he said.
