Page 9 - The Insurance Times March 2025

Insurance merger on hold, Air India finalises $20 billion fleet insurance; pre-
govt may pick one for sale mium unchanged

The Centre may drop its plan to merge Air India has finalised $20 billion insurance cover for its expanded fleet post
three general insurers and instead pick Vistara merger at existing rates, it is learnt.
one of them for privatisation this fiscal
While the sum insured has increased from $12 billion to $20 billion, the
year, two people aware of the devel-
opment said. premium outgo will remain unchanged at around $30 million.
While globally aviation insurance premiums are expected to inch up follow-
The other two may be provided addi-
tional capital to strengthen their bal- ing a spate of accidents in the past few months, Air India has managed to
ance sheets, the people cited above secure good rates. This is because of overall softness in aviation insurance
market, deft negotiations, the airline’s risk management practices and ab-
said on the condition of anonymity. To
sence of major claims, sources said.
begin with, the government will assess
the financial performance of all three The $20 billion insurance will cover against damage to aircraft from inci-
insurers in the coming quarters. dents, accidents or war. This covers 300 plus planes belonging to Air India
and Air India Express. There is a separate cover for passenger and third party
"The aim is to strengthen the general
insurers' balance sheets through liabilities.
recapitalisation before any potential Tata AIG is the lead insurer for Air India taking a significant portion of risk.
merger is considered," the person Indian public sector insurance firms and ICICI Lombard have a smaller share
added. of sum insured. The entire risk has been underwritten by London based
reinsurers.
While National Insurance, United India
Insurance and Oriental India Insurance
are considered weak, market leader SBI General Insurance improved its loss ratio by approximately
New India Assurance is seen as strong marks whopping 273% 4% compared to the same period in
and not a candidate for privatisation. FY24, aided by better risk management
growth and faster claims processing.
The Union budget 2018-19 had pro- SBI General Insurance has reported a
posed merging the three weak insur- profit after tax (PAT) of INR 504 crore
ers into one and listing it on the stock Public sector general in-
for the first nine months of the 2025
exchanges, a plan that has made little fiscal year (9M FY25), marking a whop- surers post combined
progress. Federal think tank NITI ping 273% year-on-year increase. profit of Rs 1,066 cr in Q3
Aayog recommended United India In-
During this period, the insurer also Public Sector General Insurance Com-
surance for privatisation to a secretar-
achieved a 10.9% growth in gross writ- panies (PSGICs) have achieved financial
ies' panel in FY22, but that has not ten premium (GWP) and a 10.5% rise turnaround in the December quarter,
taken off either.
in gross direct premium (GDP), surpass- posting a combined profit of Rs 1,066
At the end of the September quarter, ing the general insurance industry’s crore on the back of various reforms by
solvency ratios of National Insurance, growth rate of 7.8%. the finance ministry.
Oriental Insurance, and United India The company’s solvency ratio stood at Public sector general insurance compa-
Insurance stood at -0.45, -1.02, and - 2.12, comfortably above the regula- nies (PSGICs), that historically reported
0.71, respectively, while that of New tory requirement of 1.50. Motor insur- losses, witnessed a major turnaround
India Assurance stood at 1.81. The ance saw a 39% year-on-year increase, with all of them becoming profitable
insurance regulator mandates all attributed to strengthened underwrit- again, the finance ministry said in a
insurers to maintain a minimum sol- ing practices and expanded use of digi- statement. While Oriental Insurance
vency ratio of 1.5. The ratio measures tal platforms for policy issuance and Company Ltd (OICL) and National Insur-
an insurer's ability to service the risks renewals. ance Company Ltd (NICL) started post-
it has undertaken. According to the Health insurance grew by 12%, bol- ing quarterly profits from Q4 of 2023-
second person mentioned above, all stered by heightened healthcare 24 and Q2 of 2024-25, respectively,
PSU insurers are expected to have awareness, increasing demand for com- United India Insurance Company Ltd
positive ratios after an expected capi- prehensive coverage, and the adoption (UIICL) posted profit in Q3 of 2024-25
tal infusion. of digital solutions. SBI General also after a gap of seven years, it said.

The Insurance Times March 2025 9