National Insurance, Oriental Insurance, United India Will Be Merged – Biggest Consolidation In Insurance Space?
As per the reports, the Centre is quickly progressing on the merger of three state-owned general insurance firms which are National Insurance, United India and Oriental Insurance.
The plan is to make it a large single non-life insurer after making a thorough asset sale plan to make this happen.
How Did This Happen?
The center came to this decision of amalgamation as they aim to make these firms financially viable.
Also, this whole process is likely to be completed by the end of next month according to the official sources.
According to them, the said insurance companies have been facing shrinking finances with their solvency ratio dipping below the prescribed standard set by IRDAI – the insurance regulator.
Also, the financial results of PSU insurers have not been showing any hopes to make the situation worse.
In the past, the United India Insurance reported the biggest loss in the first quarter of 2019-20 with its net losses coming close to Rs 2,200 crore.
While Oriental Insurance also posted a net loss of above Rs 142 crore.
By citing the financial condition, IRDAI had recently flagged concerns about the deteriorating solvency ratio of insurance companies, which has been causing a negative impact on their risk capital.
What Is The Governments Plan To Mitigate The Situation?
According to the government plans, after the merger, the merged entity is expected to begin operations from April one.
Apart from that, the government is also planning to list the merged entity on bourses to enable them to raise funds.
Currently the overall insurance penetration from the current 3.7%, this move is also aimed at increasing number.
How Did They Reached To This Solution?
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, according to an official source. (Reference)
He said, “The chances of job losses are meager as the three firms have reduced hiring for a long time now and we are expecting to absorb the existing workforce,”.