The three state-owned general insurers are loss-making and have negative solvency ratios. The Reserve Bank of India, in its June 2026 edition of the Financial Stability Report, described the deterioration at the three insurers as a “direct financial stability concern”. New India Assurance, the fourth state-owned general insurer and the country’s largest, remains profitable.
The strategy pushes for an overhaul of underwriting, product innovation and performance-linked talent management. The government wants the insurers to demonstrate sustained operational improvement before committing further capital.
“Equity infusion alone cannot help them unless the underlying issues are fixed,” one of the officials said, adding, the government wants to ensure sustainability in their performance before infusing funds this time.
The Union government had already injected a cumulative ₹17,450 crore into the three insurers between FY20 and FY22 to strengthen their financial position and solvency. National Insurance received ₹9,275 crore, Oriental Insurance ₹4,420 crore and United India Insurance ₹3,755 crore.
Their solvency positions have since deteriorated sharply. United India’s solvency ratio fell to -136 per cent at the end of FY26 from -65 per cent a year earlier. National Insurance’s declined to -111 per cent from -67 per cent, while Oriental Insurance’s fell to -163 per cent from -103 per cent.
Insurers are required by the Insurance Regulatory and Development Authority of India (Irdai) to maintain a solvency ratio — a measure of their ability to meet claims and other obligations — of at least 150 per cent.
The three insurers’ underwriting losses also widened sharply last year.
Combined losses at public-sector multiline general insurers rose 58.3 per cent year-on-year to ₹29,070.57 crore in FY26. United India’s underwriting loss increased 113 per cent to ₹8,335.7 crore, while Oriental’s rose 84 per cent to ₹7,307.77 crore. New India Assurance’s loss increased 44 per cent to ₹8,801.9 crore, while National Insurance recorded the smallest increase, of nearly 6 per cent, to ₹4,625.16 crore.
The insurers are expected to improve their solvency ratios through the sale of shares in the initial public offering of the National Stock Exchange. The three companies together hold 90 million NSE shares and have put on the block 14.96 million shares at ₹1,785 each. They reduced the sale offer from an earlier plan to offload 18 million shares.
The government will review the insurers’ performance over the next few quarters before deciding the quantum and timing of any equity infusion, one of the officials said. Icra estimates that, based on current performance and solvency trends, the three insurers could require about ₹39,000 crore by March 2027 to meet the regulatory solvency requirement.
The government plans to monitor performance quarterly, with the insurers also conducting internal quarterly reviews. Department of Financial Services Secretary Sanjay Lohiya held a review meeting earlier this month and asked the companies to develop a standardised key performance indicator framework.
Data from the General Insurance Council shows that the three insurers recorded a combined net loss of ₹31,200.86 crore over the past five years. Their losses peaked at ₹11,434.38 crore in FY26, reversing the brief net profits reported by Oriental Insurance and United India Insurance in FY25. Their net incurred claims ratios have also consistently remained close to or above 100 per cent.
An email sent to the Ministry of Finance remained unanswered at the time of publication.
Underwriting and product strategy
The insurers will need to better assess the risk profiles of customer segments and realign their portfolios, while using technology to improve underwriting, one of the officials said.
Product innovation could help the insurers reach underserved segments, particularly where pricing remains a constraint, according to Amit Roy, partner and leader of insurance and allied business at PwC India.
“PSU companies’ market reach is significantly deep and wide. Based on their larger pool of risk they will be able to offer innovative products to smaller markets at differentiated price points,” Roy said.
Cyber insurance, for example, has gained traction in Tier 1 markets but remains underpenetrated across digital India in Tier 2, 3 and 4 cities, he added.
“Mathematical actuarial calculation of risk and probability would remain. But additionally they can deploy AI to understand what exactly can be done to minimise the loss with the same risk coverage, considering the customer profile remains the same,” one of the officials said.
The insurers’ role in government-backed schemes such as Pradhan Mantri Fasal Bima Yojana also offers scope for greater use of technology. One insurance sector expert said underwriting could be linked to internet-of-things weather data and satellite imagery to improve risk assessment.
Talent remains a constraint
The government also wants the insurers to strengthen their human resources and retain skilled employees as new competitors enter the Indian market following the liberalisation of foreign direct investment in insurance.
The companies are caught in a cycle in which losses constrain remuneration, contributing to employee attrition, the official said. Performance-linked incentives could help retain talent, but only after the insurers bring losses under control. “PLI and losses cannot go together,” the official added.
