Amid turbulence in the PSU bank space, public insurers also seem to be facing challenges after a global rating agency downgraded National Insurance, United India Insurance and Oriental Insurance.
Amid turbulence in the PSU bank space, public insurers also seem to be facing challenges after a global rating agency downgraded National Insurance, United India Insurance and Oriental Insurance. The rating downgrade by the agency AM Best which focuses on insurance sector indicates slump in the operating performance. It comes after Finance Minister Nirmala Sitharaman announced in the budget the merger of non-life insurance firms by seeking to amend the General Insurance Business Nationalisation Act. Two of the downgraded companies reported a dip in capital and reserves and need nearly Rs 5,000 crore capitalisation to meet the regulatory standards, The Indian Express reported citing unidentified experts. On Wednesday, the global rating agency Moody’s had upgraded rating of Punjab National Bank (PNB) after the government’s announcement of merger of OBC and United Bank with it.
It’s in the government’s interest to capitalise the three insurers and keep them solvent till the time of merger, The Indian Express reported citing former IRDA Member KK Srinivasan. The government backed insurers just require mere Rs 5,000 crore of capital infusion as against Rs 70,000 crore reportedly being infused into the public sector lenders, he added.
The financial strength rating (FSR) of National Insurance was downgraded to C (weak) from C++ (marginal) and the Long-Term Issuer Credit Rating to CCC from B. Similarly for United India, FSR was downgraded to C++ (Marginal) from B (Fair) and the Long-Term Issuer Credit Rating to ‘B+’ from ‘BB+’ for United India Insurance Company. The agency also downgraded the FSR to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating to BBB- from BBB+ of Oriental Insurance Company.
Finance Minister Nirmala Sitharaman recently announced upfront capital infusion of Rs 70,000 crore to revive the sluggish banking sector. It was in the budget tabled in July, the government had announced capital infusion.