New Delhi
The Finance Ministry is contemplating a potential capital infusion in three state-owned general insurance companies in the fourth quarter of the current financial year, depending on their performance over the preceding nine months, according to reliable sources. The ministry’s decision would be guided by the companies’ financial status and their adherence to strategic restructuring initiatives to improve their profitability and solvency margins.
The solvency margin, a critical financial buffer for claim settlements, is a key focus area for the government, with the aim of enhancing the companies’ capital adequacy and regulatory compliance. Despite prior capital infusions, the solvency ratio of certain companies remains below the mandated 150 percent, necessitating a concerted effort to bolster their financial stability and operational resilience.
These initiatives are part of a broader reform agenda encompassing organizational restructuring, product rationalization, cost efficiency measures, and digitalization within the public sector general insurance segment. Additionally, the ongoing reforms are tied to key performance indicators, emphasizing the need for efficient capital utilization and fostering sustainable growth within the sector.
With the government’s commitment to privatize one of the general insurance companies, recent legislative amendments under the General Insurance Business (Nationalisation) Act (GIBNA) have laid the groundwork for the privatization process. Finance Minister Nirmala Sitharaman’s announcement of the ambitious privatization agenda in the Budget 2021-22 underlines the government’s concerted efforts to drive structural reforms within the financial sector, thereby stimulating growth and competitiveness in the broader economy.
