The Government of India has decided to drop plan of merging three public sector general insurance companies and instead decided to infuse INR124.5bn ($1.65bn) into them to boost their balance sheet.
Plan to merge the three struggling insurer namely Oriental Insurance Company, National Insurance Company, and United India Insurance Company ahead of their proposed listing was first announced in 2018 budget.
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The total amount includes the INR25bn ($332m), which has already been injected in these insurers in February this year.
The plan to merge these entities has been has been called off due the ongoing Covid-19 pandemic and its impact on the insurance business.
Merging these companies also posed challenge as these firms use different technology platforms. It is also believed that the tree companies’ weak financial position would have not yielded good valuation during listing.
Of the total capital infusion, the government will immediately release INR34.75bn (462.5m), while the remaining INR64.75bn ($861.8m) will be released at a later stage.
The Government has also decided to increase in authorised share capital of National Insurance Company to INR75bn ($998m) and that of Oriental Insurance Company and United India Insurance Company to INR50bn ($665m) respectively to give effect to the capital infusion.
The capital infusion is also intended to ramp up the financial and solvency position of the companies, and meet the insurance needs of the economy.
