Centre to Quicken Merger of 3 PSU Insurance Companies
Published On Dec 03, 2019, Updated On Oct 26, 2020
After drawing up a comprehensive asset sale plan, the Centre is now working towards fastening the process of merging 3 PSU insurance companies namely Oriental Insurance, National Insurance, and United India in order to make it a large single non-life insurer.
The merger will make them financially stable which is estimated to be concluded by the end of December. Insurance companies run by the state have been witnessing financial crunch with their solvency ration deteriorating below prescribed norms set by the IRDAI (Insurance Regulatory and Development Authority of India). The financial state of PSU insurers is not satisfactory either. United India Insurance informed about a net loss of Rs. 300 Crore in Q1 of 2019-2020, whereas the figures were Rs. 142 Crore for Oriental Insurance.
The insurance regulator RDAI has raised issues about dipping solvency ratio of insurers as it reflects negatively on their risk capital.
As government plans, the merged entity will start operations from 1st April and it will list it in the bourses so that they are able to raise funds. The government is also looking forward that the merger will increase the overall insurance penetration which is currently at 3.7%.
In the Union Budget of 2019-2020, the Finance Minister Nirmala Sitharaman suggested a proposal for merger of 3 PSU insurance companies into a single entity.
As per the officials, the merged identity shall employ a workforce of 3 companies which are already working on the maximum level.
“The chances of job losses are meagre as the three firms have reduced hiring for a long time now and we are expecting to absorb the existing workforce,” he said.