‘Lanka’s insurance market fast growing’

Indunil Hewage

Central Bank Governor Ajith Nivard Cabraal said the segregation of composite insurance companies into life and non- life would enhance the focus and capacity of players in the industry to reach untapped areas of the economy and support the opportunities which would be generated with the five hubs concept as enumerated in Mahinda Chinthana.

Cabraal expressed these views addressing a seminar on ‘The Future of Insurance in Sri Lanka’ organized by Asian Alliance Insurance PLC (AAI), along with their new shareholders, Messrs.Financierings-Maatschappij voor Ontwikkelingslanden N.V. Netherlands(FMO) and Deutsche Investitions-und Entwicklungsgessellschaft MBH of Germany (DEG).

Asian Alliance Insurance Deputy Chairman Paul Ratnayake presenting a token of appreciation to Central Bank Governor Ajith Nivard Cabraal. Picture by- Nissanka Wijeratne

The aim of the seminar was to prepare the industry ahead of the segregated insurance operation requirement, which will come into effect from February 2015.

“The 3% of total asset of financial sector in Sri Lanka is in the insurance sector, this perhaps tell us there is tremendous scope for us to improve. However, Sri Lankan insurance industry is lagging far behind compared to Asian countries in general. In Sri Lanka, premiums as a percentage of GDP is 1.2% versus a regional average of 5.8%, whilst long term life insurance business accounts for 0.5% of GDP,” Cabraal said.

In Sri Lanka, out of 22 insurance companies, six are exclusively in general business, three in long term insurance business. Out of 22 insurance companies, only seven companies are listed.

“Sri Lanka has one of the fastest growing insurance markets in the world with low level penetration. This scenario would create space for us to grow at least 5-6 times what we are in toady. Today, we are opening up many new vistas for the country to progress. We are on a steady path to reach $ 4000 per capita income target, perhaps before 2016. We have reached almost $ 3,000 within a very short of time and there are enough areas for us to show that Sri Lanka is well within the reach to achieve $ 4,000 per capita income level target,” Cabraal said.

Leapfrog Investments Stewart Langdon said, segregation of composite insurance companies into general and life insurance business will be a technical and tricky process. However, this will be a golden opportunity for insurance companies to reset their strategic issues, change work culture, product design, missions, distribution and others and this would ultimately create enormous value for shareholders.

Segregation of composite insurance companies into general and life insurance business will create greater flexibility for individual business units to pursue discrete strategies, better management rewards, transparency of capital structure and balance sheet, sharpened management focus and shareholder value”