Public sector non-life insurance companies will need to raise around Rs 8,000 crore to meet statutory capital requirements after paying out the 12% wage increase notified by the government.
Apart from New India Assurance, the three public sector insurers — National Insurance, Oriental Insurance and United India Insurance — are already short of capital.
As the companies must pay not just revised wages but the arrears since August 2017, the expenses will skyrocket, and that will put further pressure on profitability and solvency.
The outgo for National Insurance, New India Assurance and Oriental Insurance will be more than Rs 2,000 crore, while for United India Insurance, it will be below Rs 1,800 crore.
According to industry sources, the government will have to infuse additional capital into the companies. The other option would be for the non-life companies to raise subordinated debt by selling the bonds.
The government notified the revised scheme for employees for public sector insurance companies. The wage revision has been hanging fire for several years. In the case of public sector banks, the wage revision took place in November 2020 and salaries for employees of Life Insurance Corporation (LIC) were revised from August 2021.
