Public sector general insurance companies continue to lose market share to private firms, according to data released by IRDAI. In terms of gross direct premium underwritten for and up to the month of January 2020, the collective market share of four public sector general insurance companies—National Insurance, Oriental Insurance, United India Insurance and New India Insurance—stood at 38.2 per cent, against 40.23 per cent in January 2019.
Barring New India Insurance, the other three companies have been losing market share for quite some time. However, compared to December 2019, United India Insurance has marginally gained market share in the month of January 2020.
New India Insurance continues to have highest market share in the general insurance space at 14.28 per cent at the end of January 2020, followed by United India Insurance at 9.19 per cent, National Insurance at 7.67 per cent, and ICICI Lombard at 7.22 per cent.
In the recent Union Budget, the government announced recapitalisation of Rs 6,950 crore for three public sector general insurance companies — National Insurance, Oriental Insurance and United India Insurance.
The three companies have been struggling with poor solvency ratio and falling market share.
In the February 2018 Budget, the government had announced a plan to merge the three firms. Subsequently, it planned to list the merged entity on the stock exchanges. However, there has been little progress on the merger since.
National Insurance’s solvency ratio, a key measure of financial strength, stood at 1.04 at the end of FY19, against the regulatory requirement of 1.5, according to the data. It was 1.05 for United India in the second quarter (Q2) of FY20.
The company posted pre-tax loss of Rs 1,091 crore in Q2FY20, according to the data from the General Insurance Council. Oriental Insurance’s solvency ratio was 1.56 in Q1FY20. The company had posted net loss before tax of Rs 330 crore in Q2FY20. The three insurers, under the aegis of GIPSA (General Insurance Public Sector Association), earlier appointed consultant EY to draw a blueprint for the merger plan.
After looking at all equations, including merging them with New India Assurance, EY suggested amalgamation of the three firms as the most viable option. EY had also recommended the merger process to be complete by December 2020, or within 18 months starting July.
No comments:
Post a Comment