New India Assurance has been designated as a “Domestic Systemically Important Insurer” (D-SII) by regulators for the fifth consecutive year, since 2019. This title is also held by the State Bank of India and LIC, indicating that these entities are crucial to the country’s financial stability. However, New India Assurance has been operating at a loss, with a combined ratio of 117% since 2015, meaning that for every Rs 100 earned in premiums, it has spent Rs 117 on claims and expenses.
This is a concern as a combined ratio above 100% indicates that the insurer is not making money from underwriting. While New India Assurance does generate investment income, its chronic underpricing of risk has led to sustained losses. The company has been in operation since 1919 and insures a wide range of assets, including government hospitals, oil rigs, and industrial accidents. As a state-owned behemoth, it is ubiquitous and plays a critical role in the country’s financial system.
The D-SII designation is not a reward for excellence, but rather a recognition of the company’s scale and systemic exposure. The Insurance Regulatory and Development Authority (Irdai) assigns this designation to firms that are too big and complex to fail without causing collateral damage. New India Assurance’s financial struggles are not unique, as its public-sector peers, such as United India Insurance, have even higher combined ratios, averaging 129% over the past decade.
Despite its financial challenges, New India Assurance continues to operate, and its importance to the country’s financial system cannot be overstated. The company’s ability to insure a wide range of assets and its sheer scale make it a critical component of the financial infrastructure. However, its sustained losses and high combined ratio raise concerns about its long-term viability and the potential impact on the broader financial system. As a systemically important insurer, New India Assurance’s financial health is closely monitored by regulators, and efforts are likely being made to address its financial challenges and ensure its continued stability.