As per the regulations set by the Insurance Regulatory and Development Authority of India (IRDAI), insurance companies are required to maintain surplus capital to cover potential claims.
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NEW DELHI: The Indian government has confirmed that it does not intend to provide additional capital to government-owned non-life insurance companies during the fiscal year 2023-24, according to a senior official.
The official stated that these companies are expected to be self-sustaining throughout the year, with one of them even planning to pay dividends to the government.
“While the non-life insurance companies are not in an optimal condition, they are still capable of sustaining themselves without government’s capital infusion,” the official, who spoke on condition of anonymity, revealed. In the previous year, the government had allocated R5,000 crore for capital infusion into three non-life insurance companies: National Insurance Company, Oriental Insurance Company, and United India Insurance Company. However, the Union Budget for the fiscal year 2023-24 does not include provisions for capital infusion into these companies.
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As per the regulations set by the Insurance Regulatory and Development Authority of India (IRDAI), insurance companies are required to maintain surplus capital to cover potential claims. This acts as a financial safeguard during exceptional circumstances, ensuring the settlement of all claims.
During the fiscal year 2020-21, the government injected a total of R9,950 crore into three public sector general insurers. United India Insurance received R3,605 crore, National Insurance received R3,175 crore, and Oriental Insurance received R3,170 crore.
According to ICRA, private insurers are increasing their market share in the country, while the financial stability of public sector insurers has declined. The three PSU general insurers (excluding New India) require a substantial capital infusion of around `172-175 billion by March 2024 to maintain a solvency ratio of 1.50, assuming full forbearance from the regulator.
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Insurance firms need to maintain surplus capital
As per the regulations set by the IRDAI, insurance companies are required to maintain surplus capital to cover potential claims. This acts as a financial safeguard during exceptional circumstances, ensuring the settlement of all claims.
