Govt Plans ₹4,000-5,000 Cr Infusion in Loss-Making Insurers

In a bid to stabilize the financial health of struggling state-owned general insurers, the Indian government is considering a capital infusion of ₹ 4,000-5,000 crore into National Insurance, United India Insurance, and Oriental Insurance in the upcoming financial year. This move aims to help these insurers meet regulatory solvency requirements and strengthen their operations.

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As per a recent public news report, the solvency ratios of these companies at the end of FY24 were alarmingly low: National Insurance recorded -0.45, United India Insurance -0.59, and Oriental Insurance -1.06 — all significantly below the mandated minimum solvency ratio of 1.5. This potential capital injection is contingent upon the insurers demonstrating consistent financial improvement by December 2024.  

The chronic underperformance of these insurers stems from their exposure to loss-making segments such as motor insurance and fire insurance. In the general insurance market comprising 27 players, New India Assurance remains the only profitable state-owned company, maintaining a healthy solvency ratio of 1.81 and continuing to hold its position as the market leader. Previous government bailouts for these insurers included ₹ 12,450 crore in FY21 and ₹ 5,000 crore in FY22, but these measures haven’t led to sustained financial recovery. The capital infusion under consideration is not merely financial aid; it comes with a mandate for structural reforms. The insurers may be required to exit unprofitable lines of business, streamline operations, and improve underwriting practices.  

The proposed capital support also aligns with the government’s broader strategy of privatisation and potential public listings. By improving the financial health of these companies, the Centre could position them as viable candidates for privatisation, attracting investors and reducing the fiscal burden. The infusion would serve as a bridge to potential restructuring and reforms, setting the stage for a sustainable recovery and possibly paving the way for these insurers to operate independently in the long run.  

Conclusion

The government’s proposed ₹ 4,000-5,000 crore capital infusion into loss-making state-owned insurers represents a critical intervention to restore solvency, streamline operations, and position these firms for future growth or privatisation. With New India Assurance standing out as a model of profitability and resilience, the capital injection aims to bring the other public-sector insurers back on track. If successful, this effort could lead to a more balanced and competitive insurance market, ultimately benefiting policyholders and the economy at large.