India’s central government is preparing a new revival strategy for three state-owned general insurers, with future financial assistance likely to be tied to measurable improvements in their operational and financial performance.
The companies — National Insurance Company Ltd (NICL), Oriental Insurance Company Ltd (OICL) and United India Insurance Company Ltd (UICL) — have been struggling with persistent losses and weakening solvency. Rather than relying solely on further capital injections, the government is now seeking evidence of operational improvement before deciding how much additional funding should be provided and when.
According to a report by Business Standard, the proposed revival plan places emphasis on reforms in underwriting, the introduction of new insurance products and performance-based management of employees. The aim is to address structural weaknesses within the three insurers and improve their long-term financial sustainability.
The three companies are currently loss-making, while their solvency ratios have fallen into negative territory. The Reserve Bank of India (RBI), in its Financial Stability Report published in June 2026, highlighted the deterioration in the financial condition of the insurers as a concern for financial stability.
New India Assurance, the fourth state-owned general insurer in India, remains profitable.
Earlier government support failed to halt deterioration
The government had already provided substantial financial support to the three insurers between financial years 2020 and 2022. A total of ₹17,450 crore was injected to strengthen their capital positions and improve solvency.
National Insurance received ₹9,275 crore, Oriental Insurance was allocated ₹4,420 crore, while United India Insurance received ₹3,755 crore.
Despite those injections, the financial position of the three companies has continued to weaken.
By the end of financial year 2026, United India Insurance’s solvency ratio had fallen to minus 136 per cent from minus 65 per cent a year earlier. National Insurance’s ratio declined from minus 67 per cent to minus 111 per cent over the same period.
Oriental Insurance recorded an even sharper deterioration, with its solvency ratio falling from minus 103 per cent to minus 163 per cent.
Solvency is a key measure of an insurer’s financial strength. It provides an indication of whether an insurance company has sufficient financial resources to meet future claims and other liabilities. The Insurance Regulatory and Development Authority of India (IRDAI) requires insurers to maintain a minimum solvency ratio of 150 per cent.
The scale of the deterioration has therefore placed considerable pressure on the three state-owned companies and increased the need for a more fundamental restructuring of their operations.
Underwriting losses add to financial pressure
The insurers are also facing growing losses from their core underwriting operations.
In financial year 2026, combined underwriting losses among public-sector multiline general insurers increased by 58.3 per cent from the previous year to ₹29,070.57 crore.
United India Insurance recorded an underwriting loss of ₹8,335.70 crore, representing an increase of 113 per cent. Oriental Insurance’s underwriting loss rose by 84 per cent to ₹7,307.77 crore, while National Insurance reported an increase of around 6 per cent, taking its underwriting loss to ₹4,625.16 crore.
Underwriting performance is central to the financial health of a general insurer because it reflects the profitability of its core insurance business. Persistent underwriting losses can place additional pressure on capital and make it harder for an insurer to strengthen its solvency position.
The government’s proposed approach will therefore place greater emphasis on improving the underlying insurance business rather than simply compensating for accumulated losses.
Future funding to be linked to performance
Any fresh government assistance is expected to be considered after reviewing the financial and operational progress of the three insurers over the next few quarters.
The companies will be subject to quarterly performance monitoring, while internal reviews are also expected to assess their progress. The amount and timing of any new capital injection will be determined after examining the results of these reviews.
The approach represents a shift towards linking public funding with measurable operational improvements. Areas such as underwriting performance, risk management, financial strength and internal efficiency are expected to form part of the assessment.
NSE stake sale could provide additional support
The three insurers are also looking to raise funds through the proposed sale of part of their holdings in the National Stock Exchange (NSE).
Together, the companies hold 9 crore NSE shares. Under the current plan, 1.496 crore shares are proposed to be sold at ₹1,785 per share. The proposed sale was previously set at 1.8 crore shares but was later reduced.
The proceeds could provide an additional source of funds for the insurers as they attempt to strengthen their financial position. However, the potential requirement remains considerably larger than what could be raised through the proposed share sale alone.
Rating agency Icra has estimated that if the existing operational and solvency trends continue, the three insurers could require around ₹39,000 crore by March 2027 to meet the minimum solvency requirement set by the regulator.
Reforms planned across insurance operations
The proposed revival strategy also seeks changes in the way the three companies conduct their insurance business.
One area under consideration is the restructuring of insurance portfolios based on improved risk assessment. The insurers are also expected to explore technology-driven underwriting and develop new products aimed at customers and markets that remain inadequately insured.
Improving the quality of risk assessment could help the companies make more informed decisions about which risks to cover and at what level. This is particularly relevant for insurers facing persistent underwriting losses, as poorly assessed risks can contribute to higher claims and weaken financial performance.
Technology is expected to play a larger role as well. The government is considering the use of artificial intelligence alongside conventional actuarial models to analyse customer risk profiles and identify ways of reducing potential losses while maintaining similar levels of coverage.
In agricultural insurance and other government-backed schemes, weather-related Internet of Things (IoT) data and satellite imagery could also be used to improve risk assessment.
Such technology could provide insurers with more detailed information when assessing risks associated with weather conditions and agricultural activity.
Retaining skilled employees remains a challenge
Human resources are another important element of the proposed restructuring.
The entry and expansion of competitors in India’s insurance market have made it more difficult for state-owned insurers to retain experienced and skilled employees. Their continuing financial losses have also constrained the scope for competitive remuneration and incentives, according to the report.
The proposed performance-based management system is intended to strengthen accountability while encouraging employees to contribute to operational improvements.
For insurers undergoing restructuring, retaining expertise in areas such as actuarial analysis, risk assessment, underwriting, claims management and technology can be particularly important. Losing experienced employees while attempting to overhaul business practices could make the recovery process more difficult.
Five-year losses highlight the scale of the problem
Data from the General Insurance Council show that the three state-owned insurers recorded a combined net loss of ₹31,200.86 crore over the past five years.
Their combined net loss reached ₹11,434.38 crore in financial year 2026, the highest level during the period. At the same time, their net incurred claims ratios remained around or above 100 per cent, highlighting the continuing pressure from claims.
The figures underline why the government is seeking a broader restructuring rather than relying solely on additional capital.
For National Insurance, Oriental Insurance and United India Insurance, the immediate challenge will be to improve underwriting performance, strengthen risk management, address operational weaknesses and retain skilled staff.
The government’s proposed strategy is therefore centred on a different model of financial support. Instead of treating capital injections as a standalone solution, future assistance is expected to be linked to evidence of operational progress and improved financial sustainability.
The coming quarters will be particularly important as the three insurers undergo performance reviews and work to demonstrate whether the proposed reforms can begin to reverse the deterioration in their financial position.
