On assigning OIC a triple A rating, Crisil said: "The rating reflects the strength of government ownership, General Insurance Company's parentage, strong capitalisation, healthy cash flows, strong liquidity position and low risk profile of the asset portfolio. The rating also factors in the company's comfortable market position, adequate level of reinsurance and fairly stable income. These strengths are partly offset by the continuous underwriting losses from the motor insurance business. In future, the nature and extent of the general insurance industry would have an important bearing on the risk profile of the company."

OIC has a 22 per cent marketshare in the general insurance business worth about Rs 8,000crore annually, and its share in the western region is second only to New India Assurance. While 60 per cent of business originates in the retail sector, OIC is relatively weak in the corporate sector.

Efforts are underway to improve its share in the corporate sector, and it is starting to pay off with OIC getting the largest underwriting share of Reliance Petroleum in the country. The company's underwriting has been fairly conservative, resulting in strong levels of capitalisation at 53 per cent. On the investment side, OIC's portfolio shows a 50 per cent exposure in government securities with the balance in debt to medium- and top-end corporate clients.

While Crisil said that competition to OIC will increase with the entry of private sector players in the general insurance business, low penetration in the retail sector provides an opportunity for growth. While the rating agency cites the recent tariff increase in the motor insurance business as positive development, it observed: "The extent to whichthis affects the final profitability of the general insurance business would be seen over the next few years."