NEW DELHI: The government is likely to come out with a proposal for recapitalisation of loss-making public sector non-life insurance companies. The department of financial services has been asked to prepare a plan, which sources said would require about Rs 2,000-crore infusion in the near future.The issue of the government-owned insurance companies incurring losses and how they were finding it tough to be in the business was raised at a recently held meeting chaired by Prime Minister’s principal secretary Nripendra Mishra and officials from IRDAI and other departments.“There is a fear that if corrective steps — including pumping in of fresh capital — are not taken, these companies may have to reduce the scale of their business,” said a source.In his February 2018 Budget, finance minister Arun Jaitley had announced the merger of three non-life insurers — United India Insurance, National Insurance and Oriental Insurance — to create the largest non-life company.The merged entity was subsequently expected to go for a listing. The companies had invited proposals from consultants for the merger. However, sources said that shortfall of capital was an impediment. The government had last year listed New India Assurance and GIC Re, and raised over Rs 17,500 crore by way of disinvestment According to guidelines issued by the sector regulator Irdai, insurance companies need to maintain a solvency ratio of 1.5 times, which is a statutory requirement. Two out of the four government-owned insurance companies — Oriental Insurance and New India Assurance — were compliant with the norms at the end of the first quarter of 2018-19.United India has a solvency margin of 1.21, which is an improvement from 1.1% during the previous financial year, but it’s still lower than regulatory requirements. The insurance company has managed to reduce capital requirement by shrinking business with premium income falling 15% in the first quarter.The other public sector insurance firm, National Insurance, has claimed a solvency ratio of 1.43, but it has not been cleared by IRDAI.New India Assurance, the only listed company among the four, is the most comfortable in terms of capital with a solvency ratio of 2.66. Oriental Insurance has a solvency ratio of 1.65%.