Business insurance

Government puts Oriental Insurance’s solvency ratio at a dismal 0.69

The government estimated the solvency ratio of state-owned Oriental Insurance Company at a much worse figure of 0.69 for the year ended March 31, 2021, than analysts had expected at 0.92, according to the figures. documents filed with the National Stock Exchange (NSE).

The number was reported in a recapitalization notice, sent by the Department of Finance’s Financial Services Department to the company this week.

The company’s expected gradual improvement schedule, along with recapitalization plans, shows it will still be below industry benchmarks for up to four years, ending any talk of its stock listing in the future. predictable.

The ministry issued a check for Rs 1,200 crore to the company on March 28, to bolster the capital.

The solvency ratio of an insurance company measures the size of its capital in relation to the policies it has taken out, that is to say the risks it has covered.

A ratio below 1.5, stipulated by the regulator – the Insurance Regulatory and Development Authority of India (IRDAI) – is cause for concern.

As a result, Oriental Insurance, which is in the field of general insurance, is in serious difficulty. Its other state-owned peers, National Insurance and United India, are also in the same situation.

Only the largest of them, New India Assurancew, is healthy. The company, which is the largest general insurer in the country, is also listed.

The Ministry of Finance expects New Delhi-headquartered Oriental Insurance to improve its solvency ratio to 0.86 by the end of FY23 and from there to 1.21 from there. here the end of fiscal year 26.

The company is expected to become profitable in FY26, provided its claims ratio improves and its expense ratio declines.

The government agreed to recapitalize the three insurance companies, but simultaneously planned to merge or individually list at least one of them.

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