SLIC’s National IDR upgraded

Fitch Ratings has upgraded Sri Lanka Insurance Corp Ltd’s (SLIC) National Long-term Issuer Default Rating (IDR) to ‘AA-(lka)’ from ‘A+(lka)’. Concurrently, Fitch has affirmed SLIC’s National Insurer Financial Strength (IFS) rating at ‘AA-(lka)’. The Outlooks on the National IDR and the National IFS rating are Stable.

The upgrade of SLIC’s National IDR reflects the company’s recent nationalisation, which, in Fitch’s view, indicates potential for Government support, should this be required. On June 4, 2009, the Supreme Court ordered that SLIC’s privatisation in 2003 be annulled on the grounds that the transaction was not properly structured and executed.

SLIC is now under Government control and its board of directors has been replaced. “SLIC’s systematic importance to the Sri Lankan economy is underpinned by its position as the largest insurer in the market by total assets,” said Director in Fitch’s insurance team Stanley Tsai.

As at end-2008, SLIC had a market share of 42.1 percent by assets, 26.5 percent by non-life premiums and 19.1 percent by life premiums. The company’s strong franchise and distribution network are also key rating factors.

Fitch notes that the Sri Lankan insurance industry is faced with a myriad of cyclical and structural challenges, including a slowing economy, falling interest rates, price competition and a lack of breadth and depth in the capital markets.