India grants US$350m capital for 3 state insurers

February 14 2020 by InsuranceAsia News Staff

The government of India has approved a US$350m capital injection for ailing state insurers United India Insurance, National Insurance and Oriental Insurance.

The infusion of new funds could signify the next step to the merger of the three companies, say some analysts; the merger was first proposed by finance minister Arun Jaitley in 2018. All three firms already held board meetings in January this year, where they were expected to pass the merger, but the final approval has yet to receive the green light.

However, a prevoius report by Outlook India noted from an official source: “There is no need for a merger if the finance minister announces [an] infusion of capital for the three individual companies.”

The combination of fresh capital and a three-company merger could aid the insurers in efficiency and profitability.

Union minister Prakash Javadekar, commented: “The government is infusing capital into these companies so that the solvency ratio becomes acceptable and it fulfils the criteria of the Insurance Regulatory and Development Authority of India (IRDAI). The government will infuse more capital as and when required.”

According to India’s 2021-2021 budget, a further Rs6950 crore will be allocated to the three state insurers by next year.

The government also recently announced its divestment of shares in Life Insurance Corporation of India, another ailing state insurer.

For more on the Indian market’s struggles, see here.

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