The Finance Ministry has asked Central Public Sector Enterprises (CPSEs) and government departments to relax the requirement of minimum solvency ratio of 1.5 of the liabilities as one of the eligibility criteria for the participation of public sector insurance companies in the tender process.
According to an office memorandum by the ministry to various departments and insurance firms, the stipulation on high solvency ratio makes three of the four public sector general insurance companies (PSGICs) — National Insurance Company Ltd (NIC), Oriental Insurance Company Ltd (OIC) and United India Insurance Company Ltd (UII) — ineligible to participate in the tender process in spite of their “vast experience and risk management skills”.
The Ministry’s note follows the intense competition in the sector and the decline in the performance of three PSU insurers. Only New India Assurance Company Ltd has reported a solvency ratio of more than 1.5 among the four PSU insurers. Government departments and CPSEs, which constitute a big market for insurance companies, award insurance contracts through a tender process.
