National Insurance Co to raise Rs 800cr via subordinated debt

In a bid to achieve the required solvency margin of 1.5, state-run National Insurance Company is set to raise Rs 800 crore through subordinated debt in near future, a top company official said today.
Subordinated debt is a loan or security that ranks below other loans and securities with regard to claims on a company's assets or earnings.
The Kolkata-based non-life insurer had solvency margin of 1.26 in September-end, which improved to 1.31 in December- end. Still, it was below the regulatory requirement of 1.5.
Solvency margin of an insurer is the amount by which its assets, at fair values, are considered to exceed its liabilities and other comparable commitments.

Moreover, the company has said it will first seek to achieve its solvency margin at 1.5 or above before going for listing.
The Cabinet on January 18 gave its nod for listing the five state-run general insurance companies, under which it will reduce its holding in them to 75 per cent.

"We are planning to go for raising money amounting to Rs 800 crore through subordinated debt which will be one of the measures being taken by the company to achieve the required solvency margin of 1.5 and it can happen as soon as possible," National Insurance Company Chairman and Managing Director Sanath Kumar told reporters on the sidelines of an event organised by Asia Insurance Post.

"If it happens, NIC will be the first state-owned general insurer to go for subordinated bond," he added.
On listing plans, Kumar said, "We do hope to see 1.5 solvency margin for the company by the fiscal-end. Once we achieve the solvency margin at the required level, then only we can go for listing.