Finance Ministry To Infuse Rs 3000 Crore Additional Capital In the three loss-making public sector general insurance Companies
April 15, 2023: The government has directed the three public sector general insurance companies that are currently operating at a loss to enhance their solvency ratio and fulfil the regulatory standard of 150 per cent.
As per the latest reports, the Indian government is considering a capital infusion of Rs 3000 crore in three general insurance companies – National Insurance Company Limited, Oriental Insurance Company Limited, and United India Insurance Company Limited.
This capital infusion is aimed at improving the financial health of these companies and ensuring their smooth functioning.
The capital infusion is expected to take place through a combination of ways, including a rights issue and an infusion of funds from the government.
This move is in line with the government’s efforts to strengthen the insurance sector and make it more resilient to external shocks.
The three insurance companies have been facing financial difficulties due to several reasons, including rising claim ratios and inadequate premium pricing.
The capital infusion is expected to help these companies address their financial challenges and improve their performance.
The infusion of funds is expected to benefit not only the insurance companies but also their policyholders.
With improved financial health, these companies will be better equipped to settle claims and provide better services to their customers.
The government’s decision to infuse capital in these companies is a positive step towards strengthening the insurance sector in the country. It is expected to boost investor confidence in the sector and help attract more investments in the future.
Overall, the capital infusion of Rs 3000 crore in National Insurance Company Limited, Oriental Insurance Company Limited, and United India Insurance Company Limited is a significant development that is likely to have a positive impact on the insurance sector in India.
According to a report, the government invested Rs 2,500 crore in the three general insurance companies during the fiscal year 2019-20.
However, the investment increased significantly to Rs 9,950 crore in the following year, 2020-21, and then decreased to Rs 5,000 crore in 2021-22.
The report also mentioned that public sector general insurance companies are implementing various reforms, including organisational restructuring, product rationalisation, cost rationalisation, and digitalisation.
Additionally, these companies have adopted a set of key performance indicators to ensure efficient capital utilisation and promote profitable growth.
Out of the four state-run general insurance companies, only New India Assurance Company is listed on the stock exchanges, while the remaining three are wholly owned by the government.
In the Budget 2021-22, Finance Minister Nirmala Sitharaman announced a significant privatisation agenda, which includes two public sector banks and one general insurance company.
She had stated, “We propose to take up privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments.”
Overall, the report highlights the government’s increasing investment in the three general insurance companies and the reforms being implemented to improve their efficiency and profitability.
The government’s plans for privatisation of one of the general insurance companies are also expected to boost investor confidence in the sector and promote healthy competition.
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