After Banks, Government May Recapitalize PSU Insurers

New Delhi: After banks, the government may capitalize public sector general insurers this year to improve their finances and get them ready for the next wave of restructuring.

Sources in the Finance Ministry said that management consultancy firm Ernst & Young (EY) has been shortlisted to advise on restructuring of three general insurers and based on its report, the government may also consider providing capital support to the companies.

The quantum of capital support would be worked out post EY gives its report, though DIPAM sources said that anywhere between Rs 9,000 crore and Rs 10,000 crore capital support would be required for the insurers to bring them in pink of health.

In a presentation to the Finance Ministry last year, the three companies had stated a collective recapitalisation need of between Rs 9,000 crore and Rs 15,000 crore, with each requiring about Rs 3,000-5,000 crore.

The government is looking at restructuring three relatively weaker public general insurers – National Insurance Company, United India Insurance Company and Oriental India Insurance Company.

The original plan was to merge the three entities to create an insurance behemoth having a valuation exceeding Rs 1.2 lakh crore. But the process has faced several hurdles, pushing the government to also look at de-merging the three into smaller units and then look at strategic sale of few operations to the private sector. (IANS)

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