Private sector general insurers will require Rs. 1,200 crore to Rs. 3,000 crore of capital infusion in the current fiscal to maintain the current growth rate of 17 per cent to 20 per cent according to a report by rating agency ICRA.
While some private-sector players reported an improvement in the solvency ratio over the past few years with a median of 1.78 as on December 31, 2017, the solvency levels of public-sector general insurers showed some improvement in the first nine months of 2017-18, the report said.
“There was some respite in the nine months of last fiscal with the median solvency ratio of PSU general insurers climbing at minimum levels. However, it should be noted that at least there of the four PSU insurers have used a part of fair value adjustment for solvency calculation,” it said.
While PSU insurers have the option of meeting a part of their capital requirement from their equity investments, their private sector counterparts will have to look at external sources, ICRA said.
“PSU insurers are likely to meet a large part, if not all capital requirements, through the large unrealised gains on their equity investments, which stood at Rs. 47,100 crore as on December 2017. Of this, nearly 30 per cent has been factored for solvency calculation by the three PSU general insurers,” it added.
The report also said that insurers should look at raising Tier 2 bonds to raise their solvency levels. Already, insurance companies have raised nearly Rs. 2,580 crore through these bonds to bolster their solvency levels.
