Oriental Insurance pegs capital need of around Rs 3000 crore in FY21

Public sector general insurance firm Oriental Insurance Company might need close to Rs 3,000 crore worth capital infusion to fund its growth plans in 2020-21.

According to A V Girijakumar, Chairman-cum-Managing Director, Oriental Insurance Company, the capital would be needed to fund growth plans and maintain solvency ratio.

However, the actual growth plan would be finalized on the basis of capital support the insurer gets from the government.

The company’s board is slated to meet on March 18 to examine the budget for growth in the coming fiscal.

“While we may require a capital in the vicinity of Rs 3,000 crore for growth and meeting regulatory solvency requirement in FY-21, however, the business plan (growth plan) would be made in line with the capital support that we get,” Girijakumar told newspersons on the sidelines of a session on insurance organized by the Merchants’ Chamber of Commerce and Industry here on Friday.

“The growth (in business premium) next year would be tailored to the capital support we get, we will take a considered view,” he added.

The Union Budget 2020 has earmarked Rs 6,950 crore for recapitalisation of the three public sector general insurance companies — National Insurance, Oriental Insurance and United India Insurance. The three firms are in dire need of capital to maintain solvency ratio.

According to Girijakumar, in Q3 of this financial year, the company had a loss of Rs 50 crore, against Rs 330 crore in Q2. Also, the solvency ratio is just about the regulatory norm of 1.50 per cent. Oriental Insurance’s solvency ratio was 1.56 in Q1FY20.

The state-owned general insurer, has been focusing on consolidating its business in 2019-20, is looking to grow marginally at about 6 per cent this financial year, with premium of about Rs 14,250 crore by March 2020. Last financial year, Oriental Insurance saw a business growth of over 15 per cent.

The insurer has been doing conciliation of motor third party cases, and has gone for price corrections in group health policy and property insurance. It is monitoring loss making businesses with a view to reprice them.

According to Girijakumar, the focus has been on “economics of business” rather than growing the business.

“Our focus this year has been on reviewing claims and settling them as quickly as we can. We had set a target of conciliation of close to 24,000 motor third party cases this fiscal, of this we have already completed 18,000 and are hopeful of achieving the remaining by the end of this fiscal. This will give us a big relief,” he said.

At present, health insurance accounts for nearly 30 per cent of the total premium, motor accounts for 34-35 per cent, while crop insurance makes up around 17 per cent of the total business of the company.

In the February 2018 Budget, the government had announced a plan to merge National Insurance, United India Insurance and Oriental Insurance, and list the merged entity on the stock exchanges.

However, there has little progress on the merger since, even as the financial health of the firms deteriorated in terms of losses, falling market share and poor solvency ratios.

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.