Fundraising or capital infusion into companies could be options, but further fiscal support from the government will be linked to companies showing profits. The government had earlier pumped in about Rs 17,500 crore into United India, National and Oriental Insurance during FY20 and FY22, after the Cabinet dropped a proposal to merge the three loss-making entities.
Sources say that while the solvency ratio is a key metric for assessing the health of an insurer, consistently high claim ratios, coupled with losses or low profitability, remain ongoing concerns that P&C insurers must address.
It is worth noting that the government has already ordered insurers to cut back on auto and health insurance businesses to reduce losses.
In the first quarter of the current financial year, United India Insurance reported a loss of ₹556 crore, with a solvency margin ratio of -0.73. National Insurance reported a loss of ₹293 crore, with a solvency ratio of 0.46. However, with a forbearance from IRDAI, the solvency margin ratio improves to 1.42 for National.
Oriental Insurance, on the other hand, posted a profit of ₹91 crore but had a solvency margin of -1.03, which improves to 0.78 and the company is seeking 100% forbearance from the insurance regulator.
Sources suggest that if the three general insurance sector companies are required to comply fully with the IRDA regulatory parameters, they may need an estimated capital support of Rs 20,000-25,000 crore. Meanwhile, the expected implementation of the new accounting standards, Ind AS 117, for the insurance industry is likely to lead to some recalibration of solvency margin ratios, which could provide relief to non-life insurance companies in the general insurance sector. The insurance regulator’s roadmap in this regard is still awaited.
(Edited by: Sheersh Kapoor)
First published: September 23, 2024 9:23 PM IS
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