The finance ministry may infuse capital into three public sector insurance companies — United India Insurance Company Limited, National Insurance Company Limited and Oriental Insurance Company Ltd — to improve their solvency ratio after analysing their Q3 and Q4 results of FY24, the Department of Financial Services (DFS) secretary Vivek Joshi said.
“The solvency ratio of the three public insurers — United India Insurance Company Limited, National Insurance Company Limited and Oriental Insurance Company Ltd — is still low, we seek exemption from IRDAI (Insurance Regulatory and Development Authority) for all three. That is an issue. We will see how they perform in Q3, Q4. There was no provision for capital infusion into them in the interim budget. If they perform well, the government may think of putting some capital in them,” Joshi said in an interview with Moneycontrol.
So far, the government has infused Rs 17,500 crore into the insurance PSUs.
“We have already infused a fair bit of capital in them, around Rs 17,500 crore. That has started showing some results,” he said.
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The Q2FY24 performance of the three insurance companies has been good. United India Insurance Company Limited has shown a profit of Rs 204 crore, National Insurance Company Limited (NICL) posted Rs 425 crore profit and Oriental Insurance Company Ltd (OICL) recorded a profit of Rs 180 crore.
“These companies were in red last year with United India Insurance Company Ltd posting losses of Rs 2,800 crore, NICL of Rs 3,800 crore and OICL of Rs 4,900 crore. From that position, they are showing profits in Q2 is a big thing, they are looking up. Their Q3 results will come in a few days,” he said.
Insurance Bill 2023
Joshi said the government is holding internal discussions on the draft of the Insurance Bill, which includes composite licensing. The report on the insurance sector by the parliamentary panel on finance, led by MP Jayant Sinha, which was submitted on February 6 has come at a “good moment,” he said.
The report suggested allowing composite licensing by the public insurance companies and strengthening them, which is already a part of the draft Bill.
In India, as per the provisions of the Insurance Act, 1938, life insurers can only offer life insurance products, while general insurers can offer non-life insurance products, such as health, motor, fire, marine, etc. The IRDAI does not allow composite licensing for insurance companies, which means that an insurance company cannot offer both life and non-life insurance products under one entity.
“We will study the parliamentary report in detail. After that will decide what we can implement. We will take into consideration their recommendations. A few things that the report has suggested like composite licensing and capital requirement are already there in the draft Insurance Bill,” the DFS secretary said.