The government could inject between Rs 3,000 and 5,000 crore of additional capital into the three public sector general insurance companies depending on their performance and needs during the year, sources said.
The capital injection would help improve the financial health of the general insurance companies – National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.
During the last financial year, the government made a capital injection of Rs 5,000 crore into these three insurance companies. In 2020-21, Rs 9,950 crore was infused into three general insurers PSUs by the government, of which Rs 3,605 crore was infused into United India Insurance, Rs 3,175 crore into National Insurance and Rs 3,170 crore into Oriental Insurance.
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Support from the Fund was given to weak general insurance companies last year, a need for additional funds is there to get them back on the path to profitability, sources said. A capital injection of Rs 3,000-5,000 crore can be made in these companies depending on their performance, the sources said, adding that the government has already boosted their authorized capital keeping in mind a further injection of funds.
The three public sector general insurers lack solvency margins and, to improve operational efficiency, an external consultant will be appointed shortly. Four public sector companies through the Indian Public Sector Association of General Insurers or GIPSA have launched a Request for Proposals (RFP) to revamp the insurers and achieve profitability and employee development.
“There is a proposal to restructure the organization to bring profitable growth and employee development through performance management and capacity management, in line with key performance indicators (KPIs) designed by the companies of public sector general insurance (PSGIC),” the RFP said. . The deadline for submitting offers is June 2, 2022.
Of the four state-run general insurance companies, only the New India Assurance Company is publicly listed; the other three are fully owned by the government. It should be noted that the government has already announced its intention to privatize a general insurance company. To facilitate privatization, Parliament has already approved amendments to the General Insurance Business Nationalization Act (GIBNA).
Finance Minister Nirmala Sitharaman in the 2021-22 budget announced a sweeping privatization program that included two public sector banks and a general insurance company. “We propose to undertake the privatization of two public sector banks and a general insurance company in 2021-22. This would require legislative changes,” she said at the time.