Page 51 - Digital Edition SIRC Supplement

MARKET REPORT - SRI LANKA

that for the establishment of a level playing field, this needs to Future of the market
be done soon. The state insurer also has a monopoly over state The regulator is also keen that insurers should have disaster
business which other insurance companies are expecting will recovery and Enterprise Risk Management plans in place.
come to an end in the near future. Industry experts are also Further, as a strategy, companies should have Nat CAT
expecting M&A to take place, but there are no signs of such modelling and stress/scenario testing in place to make sure that
transactions. there are no sudden shocks to their stakeholders.
Compulsory listing
As per the regulations, all insurance companies will have to be Insurers should work together towards building up the image
listed, after 3 years of issuing a license and within one year of of the industry, particularly the image of the life insurance
segregation. However, the companies segregated were given advisors, to a level where the society will accept them with
an extension period of 3 years from the date of segregation. much respect than what they receive today.

The challenge is that within the next 3 years, around 30 The Sri Lanka Insurance Institute, which is the only
insurance IPOs will flood the stock market. Can smaller recognised insurance education provider in Sri Lanka, will
companies face this challenge? There are concerns that the also have an important role to play, not only in enhancing the
government is planning to exempt foreign insurers whose knowledge of the existing cadre of the insurance industry, but
parent companies are listed in overseas stock exchanges. also in attracting new young talent to the industry by promoting
However, the state company might be exempted from the their insurance educational programmes.
compulsory listing requirement. This will create an unfair trade
practice and breach in the level playing field conditions, an issue
which might even end up in courts. The new government will
have to look in to this proposed amendment seriously to be fair
to all parties concerned.
Implementation of RBC
The parallel RBC run has commenced and it is interesting
to note that other than 2 or 3 smaller companies, all other
companies are well within the proposed RBC norms. However,
the minimum capital requirement of LKR500 million (US$3.8
million) is too low for a market like Sri Lanka and the regulator
should consider to raise it to LKR1 billion which will help in
developing a stronger insurance market.
National Insurance Trust Fund (NITF)
The industry is seriously concerned that NITF, to which 30%
compulsory reinsurance cessions from the non-life insurers are
ceded, has been operating without a retrocession programme
for the last couple of years. However, the present management
has decided to place their retrocession cover soon which is
appreciated by the industry.

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