National Insurance looks at improving solvency ratio

Kolkata, Jan 10 (IANS) State-run general insurer National Insurance on Tuesday said it is looking at improving solvency ratio before listing in the stock exchanges next fiscal.

"Our efforts are geared up towards improving the solvency ratio by March before our public offer in the next financial year," said its Chairman and Managing Director K. Sanath Kumar.

A higher solvency ratio would translate into a better valuation of the insurance company, he said.

Solvency margin is how much an insurance company has in the form of prescribed assets over liabilities and also helps investors determine the financial strength of the company.

Insurance Regulatory Development Authority of India has set the ratio at 1.5 and all insurance companies are required to maintain the solvency ratio.

The city-headquartered insurer reported a solvency ratio of 1.2 in the first six months of the current fiscal (2016-17).

Sanath Kumar also said that prescribed assets consider equity capital on a book value basis in comparison to market based valuation and it does not include real estate.

"We have assets in the form of real estate which is not considered for solvency margin. Some of the past equity investments are much higher from a market value perspective," he said on the sidelines of a programme organised by Calcutta Chamber of Commerce.

He also said that a combination of steps including lowering of exposure in loss making group health insurance, writing more retail health and motor policies and improving the claims disbursal efficiency could help improve the solvency ratio.A

The insurer informed the capital market regulator about the steps it is taking to improve the ratio and requested the government to allow raising capital from the market.

Finance Minister Arun Jaitley had announced, in the 2016-17 union budget, the decision to allow listing of public sector general insurance companies in the stock exchanges.