October 24, 2021

The World Live Breaking News Coverage & Updates IN ENGLISH

The World Live Breaking News Coverage & Updates IN ENGLISH

3 PSU non-life insurers start reducing branches

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, 3 PSU non-life insurers start reducing branches, The World Live Breaking News Coverage & Updates IN ENGLISH
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, 3 PSU non-life insurers start reducing branches, The World Live Breaking News Coverage & Updates IN ENGLISH

MUMBAI: Public sector non-life insurance companies have begun a restructuring exercise of shrinking their branch network in a bid to reduce costs and improve finances. Overall, three weak PSU insurers — National Insurance, Oriental Insurance and United India — are targeting around 25% office rationalisation through mergers and closures.
The rationalisation plan is moving ahead even as the government has introduced legislation to facilitate the privatisation of state-owned general insurance companies. The General Insurance Business (Nationalisation) Act — or GIBN Act — amendment was notified on August 18. The amendment states that on and from the date on which the central government ceases to control any specified insurer, after the commencement of the GIBN Act, the provisions of this Act shall cease to apply in respect of that specified insurer.
Following the Budget announcement to sell one PSU non-life insurer, the finance minister said that employee interests would be protected and that privatisation was not going to end up as selling for closure. The officers’ association in the non-life companies has petitioned the government, asking it to not sell the companies but to merge the three non-life companies to strengthen them. Some senior PSU officials feel that a merger with New India Assurance might be the only option as standalone companies may not be attractive to investors.

, 3 PSU non-life insurers start reducing branches, The World Live Breaking News Coverage & Updates IN ENGLISH

“Merger and rationalisation of the three weak PSUs — National, Oriental and United India — makes sense. The public issue of the merged entity should, if at all, be taken up well after the merger process is completed and the merged entity becomes stable and profitable,” said sector regulator Irdai’s former member K K Srinivasan. He added that the government should also not be in a hurry to disinvest any more of its stake in New India Assurance and GIC Re.
National Insurance reported a loss of Rs 2,751 crore for FY21, according to its public disclosures. The company’s solvency margin ratio to required solvency margin had shrunk to 0.12 as against the mandated 1.5. Oriental Insurance had a loss of Rs 1,498 crore and a solvency ratio of 0.92. United India reported a loss of Rs 300 crore and a solvency ratio of 0.7. The three PSU insurers have total offices of over 5,200, which have shrunk from 6,001 in March 2021. The officers’ association has said that a merger of the three PSUs would end unhealthy competition and bring in economies of scale. “By following a process of appropriate merger and consolidation of existing offices, we could achieve the objective of the economy of scale with the resultant operating offices having a much bigger average size than the corresponding existing office,” the National Confederation of General Insurance Officers Association had said in their representation to Niti Aayog in July.

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