By: Staff Writer
August 20, Colombo (LNW): Sri Lanka’s insurance sector is anticipated to benefit significantly from the ongoing recovery in economic activity, according to Central Bank Governor Nandalal Weerasinghe.
With improving business conditions, lower inflation, and reduced interest rates in traditional financial products, there is likely to be an overall increase in demand for insurance services.
The insurance market in Sri Lanka is expected to reach a gross written premium of approximately $1.66 billion by 2024, with the non-life insurance segment leading with an estimated market volume of $1.13 billion. The average insurance spending per capita is projected to be around $75.54 in the same year.
However, Weerasinghe cautioned that the sector’s substantial exposure to government securities might have resulted in lower returns due to the currently low yields compared to those during the crisis period.
The total Gross Written Premium (GWP) for the insurance industry, covering both Long-Term and General Insurance businesses, amounted to Rs. 78,589 million as of March 31, 2024, representing a 7.39% growth from the same period in 2023. This growth reflects an increase of Rs. 5,411 million year-on-year.
Speaking at the Sri Lanka International Insurance Summit 2024 in Colombo, the Central Bank Governor highlighted that although the Sri Lankan insurance industry is relatively smaller than those of some peer economies, it holds significant growth potential.
The total assets of insurance companies reached Rs. 1,098,988 million by the end of the first quarter of 2024, a 10.88% increase from Rs. 991,126 million at the end of the first quarter in 2023.
As of March 31, 2024, there were 29 insurance companies operating in Sri Lanka, with 15 engaged in Long-Term (Life) Insurance, 13 in General Insurance, and one operating as a composite company. Additionally, 78 insurance brokering companies were registered, with their total assets growing by 27.92% to Rs. 13,243 million by the end of the first quarter of 2024.
Despite the sector contributing 0.8% to the GDP in 2023, the penetration rate has remained below 2% over the past decade. Sri Lanka’s insurance industry has room for expansion, especially as the economy continues to recover.
Central Bank Governor stressed the insurance sector’s crucial role in fostering economic growth by managing risks associated with new ventures and technological advancements, supporting lenders, and providing protection in the wake of natural disasters.
Furthermore, he underscored the need for the insurance sector to enhance its role in social protection. With around 58% of Sri Lanka’s employed population working in the informal sector, there is an urgent need to develop insurance products tailored to this significant demographic
The industry must also address challenges related to a rapidly aging population, rising health expenses, and increasing non-communicable diseases to ensure adequate coverage and reduce reliance on the limited fiscal sector.
Central Bank Chief Weerasinghe concluded by acknowledging that while Sri Lanka’s macroeconomic environment is expected to remain stable, uncertainties persist due to geopolitical risks, commodity price fluctuations, and slow recovery in key global markets.
