The streamlining plan is moving forward even as the government has enacted legislation to facilitate the privatization of the safe companies. the General insurance The amendment to the Companies (Nationalization) Law – or GIBN Law – was notified on August 18. The amendment establishes that from the date the central government ceases to control any specific insurer, after the commencement of the GIBN Act, the provisions of this Act shall cease to apply with respect to that specified insurer.
Following Budget’s announcement to sell a PSU non-life insurer, the finance minister said that employee interests would be protected and that the privatization was not going to end as a closing sale. The association of non-life company officials has presented a petition to the government, asking it not to sell the companies, but rather to merge the three non-life companies to strengthen them. Some senior PSU officials believe that a merger with New India Assurance might be the only option, as independent companies may not be attractive to investors.
“The merger and streamlining of the three weak PSUs – National, Oriental and United India – makes sense. The public issue of the merged entity should, in any case, be addressed long after the merger process is complete and the merged entity becomes stable and profitable, ”said former member of the Irdai sector regulator, KK Srinivasan. He added that the government should also not be in a rush to divest more of its stake in New India Assurance and GIC Re.
The National Insurance reported a loss of Rs 2,751 crore for FY 21, according to its public disclosures. The ratio of the company’s solvency margin to the required solvency margin had been reduced to 0.12 compared to the required 1.5. Oriental Insurance had a loss of Rs 1,498 crore and a solvency ratio of 0.92. United India reported a loss of Rs 300 million and a solvency ratio of 0.7. The three PSU insurers have total offices of more than 5,200, down from 6,001 in March 2021. The officers’ association has said that a merger of the three PSUs would end unhealthy competition and generate economies of scale. “By following a proper merger and consolidation process of existing offices, we could achieve the objective of economies of scale with the resulting operational offices having an average size much larger than the corresponding existing office,” the National Confederation Association of General Insurance Officers had said on his behalf Niti Aayog in July.