As the merger of the largest public sector bank, State Bank of India, with its subsidiaries gets completed, the Centre is now exploring the possibility of merging three general insurance public sector units before hitting the capital markets. 

The Department of Investment and Public Asset Management (Dipam) has initiated consultations on a possible merger of Oriental Insurance, National Insurance and United India Insurance and the combined entity would be then taken to the market for listing. It is estimated the combined entity will have around 35 per cent share of the domestic general insurance market while underwriting total direct premium of over Rs.30,000 crore.

 Senior officials in the disinvestment department of the Finance Ministry said, "It is not possible for the general insurance companies to hit the capital markets at the moment since the solvency ratio of these companies are below the IRDA mandate. Hence, we are considering a proposal to merge them and make a larger entity and then hit the capital markets." 

The government is also actively looking at companies for consolidation with the Prime Minister’s Office (PMO) keen on having one or two larger entities rather than several smaller ones. 

According to the Insurance Regulatory and Development Authority of India (IRDAI) annual report 2015-16, the market share of Oriental Insurance declined to 8.63 per cent in 2015-16 from 8.75 per cent in 2014-15 period and that of National Insurance also fell to 12.43 per cent from 13.27 per cent in 2014-15.  

While the solvency ratio of National Insurance (1.26 per cent) and Oriental Insurance (1.1 per cent) is less than the threshold of 1.5 per cent mandated by IRDAI, United India Insurance has suffered huge losses (Rs.429 crore) in the first half of the current fiscal. Both Oriental and National Insurance have also lost market share in the last financial year. The government’s assessment is that these entities are unlikely to get good valuation if listed separately.

The Union Cabinet in January approved listing of five state-owned general insurance firms on the stock exchanges. The government plans to bring down its stake in these companies to 75 per cent in tranches through a combination of issuance of fresh equity shares and offer for sale, Union Finance Minister Arun Jaitley said in the briefing after the Cabinet meeting.

The Cabinet Committee on Economic Affairs (CCEA) gave its approval for listing five state-owned General Insurance Companies ~ New India Assurance Company, United India Insurance, Oriental Insurance Company, National Insurance Company and General Insurance Corporation of India (GIC). Senior ministry official said, "We are considering the merger for these three entities and the other two re-insurance entities GIC and New India Assurance will be hitting the capital markets once the details and timings are finalised." 

The most recent consolidation exercise has been in the process of completion of merger of State Bank of India with its five associate banks ~ State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and the State Bank of Travancore.