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MARKET REPORT - SRI LANKA
Maintaining growth
momentum amidst challenges
Dr Jagath Alwis, Chief Technical Officer, Ceylinco General Insurance, talks
about the challenges facing the market, and what needs to be done to maintain
and enhance further growth.
Anew political era has dawned upon Sri Lanka after towards the development of microinsurance.
a new President was elected in January this year Boost for life insurance
and whose election campaign was based on good The IASL with the blessings of the Insurance Board of Sri
governance and anti- corruption. This was further endorsed Lanka has declared the month of September as the “Life
by the people after the conclusion of the Parliamentary Insurance Month” where life insurance players in the country
elections in August where the two main political parties are planning to spread the message of life insurance to 1 million
formed a national unity government. Sri Lankans during the month of September with a target to
sign up a minimum of 75,000 new policies.
Even though economic activities have slowed down since
the middle of last year, the country has recorded an economic This initiative will help to create awareness among citizens
growth of 7.4% compared to 7.2% the previous year. But during about the need for life insurance and also to push the penetration
the first quarter of this year, it was recorded at 6.4% (base year rates in the life insurance industry which is only at 0.46%.
as 2002). Inflation at the end of last year was 3.3%, which has Currently 12.5% of the population has life insurance policies
further declined to 1.7% in June 2015 and in the last two months which amounts to 28% of the work force of the nations.
a deflation was recorded. The per capita income at the end of
last year was US$3,625. IASL also successfully held the National Forum for
Insurance sector maintains steady growth Life Insurance Advisors (NAFLIA), the local version of
The insurance industry recorded a growth of 5.52% in 2014 and MDRT, which is an annual event focused on increasing the
the total GWP was LKR103.353billion (US$736 million). The professionalism of life insurance advisors. This year’s forum
growth in 2013 was 8.97%. The decline was evident in both was well attended with over 1,000 advisors.
life and non-life classes. In 2014 the non-life industry growth Net combined ratio up
was only 4.4% compared to 7.28% in 2013, and the life industry The total net claims ratio of the market for 2014 was 65.42%
growth was 7.04% compared to 11.2%. These figures are and the average market net expense ratio was recorded at
inclusive of Strike, Riots and Civil Commotion and Terrorism 44.24% and the net combined ratio was recorded at 109.66%,
premium remitted to the National Insurance Trust Fund (NITF) compared to 2013 where was only 102.13%. This is a major
by the general insurance companies which amounted to LKR3.5 concern for the non-life companies after the segregation of
billion in 2014 and LKR2.96 billion in 2013. composite companies to separate life and non-life companies.
However, the industry is confident that in 2015 the total The main contributors to the high net claims ratio are the
industry growth will be above 10%.
Motor continues to dominate 2010 2011 2012 2013 2014
In the non-life business, Motor 61.27 63.78 61.81 60.83 65.42
continues to be the biggest portfolio Net claims ratio 39.58
(%) 100.85
with 63.24% share followed by
Miscellaneous with 22.19%, Fire Net expense ratio 38.04 38.51 41.30 44.24
11.29% and Marine 2.28%. (%)
101.82 100.32 102.13 109.66
During the first seven months of Net combined
this year, the new vehicle registration ratio (%)
has grown by 93% and the non-life Source: IBSL Annual Report 2014
insurance companies will benefit
from this.
The non-life sector is also expected to benefit from a few price war due to severe competition, followed by flood claims
major engineering projects that are in the pipeline that were and increase in claims costs, particularly due to increasing
postponed since mid-2014. Most companies in the market are cost of imported spare parts due to a declining local currency
concentrating on bancassurance and microinsurance products. against major foreign currencies.
Microinsurance has huge potential Segregation of composite insurers
The regulator is also very keen to develop the microinsurance Segregation of composite companies to separate life and
sector and is in the process of studying the products available non-life companies have commenced since the last quarter of
in the market and the existing distribution system. 2014 and most of the segregated companies have commenced
operations from 1 January 2015. At the end of August 2015,
The Insurance Association of Sri Lanka (IASL) will be there are 14 non-life, 11 life, and four composite companies
hosting the 12th International Micro insurance Conference which have yet to to comply with the law to segregate.
jointly with Munich Re Foundation from 15 to 17 November
2016 which will create more awareness of microinsurance in the Most significantly, state insurer Sri Lanka Insurance
local market and this demonstrates the commitment of insurers Corporation Ltd has not segregated yet and the industry feels
48 SIRC Supplement • November 2015 • www.asiainsurancereview.com Back to Contents
