The finance ministry is planning an additional capital infusion of Rs 3,000 crore this fiscal in the three loss-making public sector general insurance companies to improve their health,  source said.

The central  government in FY22 provided Rs 5,000 crore capital to three insurers viz., National Insurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company.

National Insurance Company Limited was given the highest Rs 3,700 crore, followed by Delhi-based Oriental Insurance Company Limited Rs 1,200 crore and Chennai-based United India Insurance Company Rs 100 crore.

These companies have reportedly been asked to improve their solvency ratio and meet the regulatory requirement of 150 per cent. The solvency ratio is a measure of capital adequacy. A higher ratio reflects better financial health and the ability of the company to pay claims and meet future contingencies and business growth plans.

Except for  the solvency ratio of New India Assurance, this key indicator of the three Public sector general insurance companies stood below the regulatory requirement of 150 percent in 2021- 22. For example, the solvency ratio of National Insurance Company Limited was 63 percent, Oriental Insurance Company Limited 15 percent and United India Insurance Company 51 percent.

The solvency margin is the extra capital the companies must hold over and above the claim amounts they are likely to incur. It acts as a financial backup in extreme situations, enabling the company to settle all claims.

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