General insurance be recapitalized cos could in FY25

The recapitalization is to prepare them for listing and privatization in the coming fiscal year

- Rhik Kundu & Subhash Narayan

The government may recapitalize state-owned general insurers to help them meet regulatory requirements in preparation for their planned listing and privatization in the coming financial year, two people aware of the matter said.

A token capital may be provided as early as the upcoming budget on 1 February, they told Mint.

The capital infusion would help improve the financial health of the state-backed general insurance firms, one of the persons mentioned above said.

The recapitalization will also help improve their solvency ratio, a key parameter that indicates a financial buffer to settle all claims in extreme situations, the person added.

There are four state-backed general insurance firms-National Insurance Co. Ltd, Oriental Insurance Co. Ltd, United India Insurance Co. and New India Assurance.

The solvency ratio of three of the four companies was negative at the end of the March quarter of FY23. The solvency ratio of an insurance company compares the capital it has to the risk it has taken on.