3 PSU insurance companies merger to be complete by Dec

Representative image. (Photo/Pixabay)

After coming up with a thorough asset sale plan, the Centre is working to quicken the merger of three state-owned general insurance firms -- National Insurance, United India and Oriental Insurance – to make it a large single non-life insurer.

The amalgamation, aimed at making them financially viable, is likely to be completed by the end of next month, official sources told DH.

State-run insurance companies have been facing deteriorating finances with their solvency ratio dipping below the prescribed norms set by the insurance regulator – IRDAI.

The financial results of PSU insurers have not been encouraging either. The United India Insurance posted a net loss of Rs 300 crore in the first quarter of 2019-20. Oriental Insurance posted a net loss of above Rs 142 crore.

IRDAI had recently flagged concerns about the deteriorating solvency ratio of insurance companies, which has a negative impact on their risk capital.

As per the government plans, the merged entity is expected to begin operations from April one. The government is also planning to list the merged entity on bourses to enable them to raise funds.

The move is also aimed at increasing the overall insurance penetration from the current 3.7%.

Finance Minister Nirmala Sitharaman, in the Union Budget of 2019-20, had mooted the proposal for amalgamation of the three PSU insurance companies into one.

According to an official privy to the plan, the merged entity is also expected to soak up much of the workforce of the three firms, which are already working on an optimal 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.

Correction: The earlier version of this article incorrectly mentioned net loss of United India Insurance at Rs 2,200 crore in the first quarter of 2019-20.

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