Centre is considering a 'turnaround' plan for the three main general insurance companies after reviewing their capital requirement, with an option of government infusion or a fund raise, it is learnt.
CNBC-TV18 cited sources familiar with the development to report that the possibility of merging the non-life PSUs with New India Assurance is also on the table.
The report mentions that further infusion will be linked to the profitability of the insurers. Centre had in the past infused Rs 17,500 crore in the three non-life insurers during FY20-22, after a proposal to merge the insurers did not clear the Cabinet's approval. The proposal of an insurance merger was initially floated in the FY18 Budget, and it is learnt that this plan may now be revived.
It is estimated that non-life PSU insurers may need up to Rs 25,000 crore for compliance with IRDAI regulations. A report from rating agency ICRA estimates that the capital requirement for these insurers (excluding New India) between Rs 9,400 crore and Rs 10,020 crore to meet the solvency requirement by March 2025.
Loss or lower profits may remain a concern for the sector, which will need to be addressed by the Centre is the turnaround plan is to go ahead. National Insurance had during Q1FY25 registered a net loss of Rs 293 crore, while New India Assurance is profitable. It remains to be seen how this merger between listed and non-listed entities will pan out.
The government has been looking to improve Oriental Insurance, National Insurance, and United India Insurance through capital support and business recovery initiatives.
The 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.
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