Considering the current economic scenario, the government has halted its plan to merge three general insurance companies - Oriental Insurance Company, National Insurance Company and United India Insurance Company.
In a press release, the government said, “Process of merger has been ceased so far in view of the current scenario and instead, the focus shall be on their profitable growth.”
In fact, the Union Cabinet has approved capital infusion of Rs 12,450 crore in these three insurance companies. This sum includes the Rs 2,500 crore, which was already infused in February.
The capital will be used to increase the solvency ratio of these companies. Solvency ratio is a measure of how much the company has in assets versus how much it owes. It helps investors evaluate the company’s ability to meet its obligations.
The government says that “The capital infusion will enable these three public sector general insurance companies to improve their financial and solvency position, meet the insurance needs of the economy, absorb changes and enhance the capacity to raise resources and improved risk management.”