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Govt to infuse more capital in public sector general insurers next year

March 13, 2023

Govt to infuse more capital in public sector general insurers next year
The government may have to infuse more capital in the three public sector general insurance companies to improve their financial health, a senior government official said.

The government last year provided ₹5,000 crore capital to three insurers –National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.

Based on the performance in the FY23, the finance ministry would take a call as to how much capital they would require to meet regulatory requirement, the official said.

They are not in good financial health and fund would be infused in these entities to augment their solvency margin, the official added.

The solvency margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur. It acts as a financial backup in extreme situations, enabling the company to settle all claims.

As per the regulator IRDAI’s mandate, the minimum solvency ratio insurance companies must maintain is 1.5 to lower risks. In terms of solvency margin, the required value is 150 per cent.

The Budget 2023-24 has not provided for the capital infusion for insurance companies but the funds can be sought through supplementary demand, the official said.

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