Heads of three public sector insurers will be meeting senior officials of the finance ministry on Friday to discuss the roadmap for their merger. Finance minister Arun Jaitley, in his Budget speech, had announced the proposal to merge National Insurance Company, United India Assurance Company and Oriental India Insurance Company.
The merged entity will be listed on the stock exchanges. If the merger goes according to plan, the resultant entity would become, by a wide margin, the largest non-life insurance company in the country.
“This will be the first meeting post the announcement of merger in the Budget. Government wants to clear the merger in the next financial year and also plans to list the merged entity immediately. We assume that government wants to know how will some insurance companies increase their solvency ratio and improve other financial parameters before they get merged and listed,” said a senior official of the top public sector insurer on condition of anonymity.
Solvency ratios of Oriental Insurance and United India Assurance were below the mandatory level of 1.5% in the last financial year, according to the 2016-17 annual report of Insurance Regulatory and Development Authority of India (Irdai).
Currently, New India, which is also public sector insurance company, is the leader in the general insurance segment with a market share of 15.22% as on January 2018, shows data from Irdai. If merged, the market share of the three other public sector insurers will add up to about 30%. All the four public sector insurers have a collective 50% share of the market in terms of gross direct premium underwritten, in this fiscal up to January 2018.
K Sanath Kumar, CMD of National Insurance Company said, “Though the merger will result in the making of a very strong company with higher enterprise value and a good synergy, a lot depends on how long it would take to complete the process.”