Government's plan to merge and list state-run general insurance companies may be delayed

As a part of the Union Budget 2018 speech, the then finance minister Arun Jaitley announced a plan to merge of three state-run general insurance companies and a subsequent listing. PSU general insurance companies like National Insurance, United India Insurance and Oriental insurance would be a part of this scheme of arrangement, which would help the government achieve it's divestment target of 80,000 crore for FY18-19.

It's been almost a year since the development and the government has not been able to take the plan forward. Sources tell CNBC-TV18, that the plan to merge the three insurance agencies and list the combined entity on the exchanges is unlikely to be completed in FY20 as well and could be pushed to FY21.

This is primarily due to the deteriorating financials for two out of the three PSU general insurers. According to sources, the solvency margin for National Insurance and United India Insurance stand at approximately 1.27 times against the regulatory requirement of 1.5 times. Out of the three insurers, only Oriental Insurance has a solvency margin of 1.54 times.