Budget 2024-25: Budget 2024 may propose Rs 5,000-cr cash jab for revival of PSU general insurance trio| Report

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The government is likely to infuse Rs 5,000 crore into three state-run general insurers — Oriental Insurance Co Ltd, National Insurance Co Ltd, and United India Insurance Co Ltd — delaying their planned privatisation, according to the Economic Times.

Officials have indicated that discussions with stakeholders are complete, and an announcement is expected in the upcoming budget. The final amount may vary, but the government's commitment to bolstering these insurers' balance sheets remains firm.

As of December 2023, the solvency ratio for the three insurers was approximately 0.58, falling short of the regulatory requirement of 1.50. The solvency ratio measures an insurer's capital buffer to settle claims under extreme conditions.

A report from rating agency ICRA estimates that the capital requirement for these insurers (excluding New India) is between Rs 9,400 crore and Rs 10,020 crore to meet the solvency requirement by March 2025. Since 2021, the government has infused Rs 17,500 crore into these insurers.

Market share data shows a decline for public sector general insurers, dropping to 31.18 percent in FY24 from 32.27 percent the previous year, while private insurers' share increased to 53.52percent from 51.36 percent. The ICRA report also noted that the combined ratio for PSU insurers is expected to remain weak, affecting profitability.

A selloff in the PSU cover companies doesn't seem likely this fiscal, with the focus on strengthening the insurers and regaining market share through effective business planning. The privatisation process will only begin once the insurers are financially robust, in line with the government's policy.