Inter-ministerial talks on fate of 3 govt-owned general insurers

An inter-ministerial group is meeting this week to draw a roadmap for a two-phase merger of state-run unlisted general insurers, a finance ministry official has said.

“We can kickstart with merger among the three firms as planned and go for the next phase after some time,” the official said, adding that the Department of Investment and Public Asset Management should be drawing up a timeline for the process.

The government will also explore how to consolidate these companies–Oriental Insurance, National Insurance and United India Insurance Company–with the minimum capital infusion to avoid burdening the treasury.

Another government official said, “Initial estimates show that more than INR100bn ($1.45bn) will be required for the proposed merger.”

Other estimates are that INR130bn would be needed to shore up the insurers.

Thus, all eyes will be on the Budget address on 5 July for the amount of funding the government would inject into the three insurers.

In last year's Budget speech, the government announced that the three insurers would be merged and the merged entity listed on the bourse.

Currently, different proposals have been sounded, including letting listed New India Assurance to take over the merged entity so as to avoid competition.

The combined market share of the three state-run insurers in terms of gross direct premium was about 25% for the first five months of the year. New India Assurance had a market share of 16.8% during this period.