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.

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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.

Sources added that all three PSU general insurers had sought a recapitalisation from the current government as a part of the interim budget. National Insurance had sought a recapitalisation of approximately Rs 2,000 crore, whereas United India and Oriental Insurance had sought a recapitalisation fund of approximately Rs 1,200 crore and Rs 500-Rs 800 crore, respectively.

No announcement from the finance minister Piyush Goyal has only delayed the integration plan further and the insurers are not hopeful of receiving and fund infusion till the next government is formed.

Oriental Insurance said the company sought capital from the government to support growth, but declined to comment on the delay in the integration process.

National Insurance and United India Insurance have not yet replied to CNBC-TV18's requests for comments.

First Published:Feb 5, 2019 11:31 AM IST