By: Staff Writer

February 01, Colombo (LNW): A new directive that Sri Lankan non-life insurers remit 100% of motor insurance strike, riot, civil commotion and terrorism (SRCCT) premiums to state-owned National Insurance Trust Fund Board (NITF, BBB(lka)/Stable) should benefit NITF while the underwriting profitability of non-life insurers is likely to worsen, says Fitch Ratings.

However, the effect on non-life insurers’ profitability and risk-based capital adequacy ratios could be reduced if they are able to raise premium pricing.

The impact will also depend on the level of commissions motor insurers receive from NITF for providing SRCCT cover.

Prior to 2024, industry practice was to remit only 12% of SRCCT premiums to NITF under a reinsurance arrangement, although a 2008 government gazette required full remittance.

The SRCCT segment has generally been highly profitable in recent years due to relatively low claim incidence, though there were significant claims in May 2022 as a result of anti-government protests.

NITF has yet to renew its reinsurance cover with international reinsurers for the SRCCT segment following its expiration in July 2023, and we believe unforeseen losses faced by NITF without such cover could result in heightened volatility for its capital position and earnings.

This, along with the non-renewal of its retrocession cover for its inwards reinsurance business, was a factor in our decision to downgrade its rating, from ‘BBB+(lka)’, in October 2023.

 NITF’s combined ratio for SRCCT was 27% during the last five years, against its overall combined ratio of 78%, with ratios below 100% indicating an underwriting profit, which means a rise in premiums should boost profitability.

Motor insurers previously had a maximum annual aggregate net retention of LKR10 million before passing on losses to NITF. This will no longer be the case under the new setup and NITF’s exposure will increase as a result

The non-life industry’s combined ratio increased to 113% in 3Q23, from 109% in 2022, partly reflecting various factors that have eroded the underwriting profitability and market share of non-life insurers in the motor insurance segment in recent years.

Fitch Ratings estimates that the new requirements for SRCCT premiums may add 5pp-10pp to the non-life sector’s combined ratio, before accounting for any premium price adjustments and any commissions from NITF.

This could weigh on the improvement in the combined ratio that we had expected for Fitch-rated non-life insurers in 2024.

Nonetheless, Fitch expects Sri Lanka’s economic conditions to improve in 2024, with GDP growth recovering, inflation easing and external liquidity metrics improving.

These factors should support vehicle demand and motor insurers may be able to raise premiums significantly faster than inflation, on average, over 2024. 

By: Staff Writer

February 01, Colombo (LNW): The construction industry in Sri Lanka contracted by 14.9% in real terms last year, down from the previous estimate of a 7.9% decline, owing to the ongoing economic crisis, a steep currency depreciation and rising inflation.

According to the latest report of purchasing manager index released by the Central Bank released recently, the construction PMI, as reflected by the Total Activity Index value of 48.6 in December 2023, indicated a slower contraction in construction activities compared to November 2023.

The respondents mentioned that the limited availability of project work continued to hamper the activity levels.

New Orders declined in December, broadly at a similar pace compared to the previous month. Many respondents mentioned that currently they are heavily relying on foreign-funded projects.

Meanwhile, Employment contracted mainly due to the layoffs in line with the project completions.

Further, Quantity of Purchases remained contracted during the month since the ongoing work and the upcoming projects continued to decline.

In the meantime, Suppliers’ Delivery Time remained lengthened in December With the lack of upcoming projects and the impact of tax revisions on price levels, the industry outlook for the next three months is on the downside.

Further weighing on construction activity is the suspension of major infrastructure projects due to financial issues, owing to an increase in foreign debt and decreasing tax revenues.

According to World Bank, as of December 2022, Sri Lanka has an external debt burden of around Rs16.7 trillion (US$52 billion). Of that, 40% is owed to private creditors, including financial institutions, while the rest is owed to bilateral creditors, of which China, Japan and India are the largest.

Despite near-term challenges, the medium to long term growth prospects of the Sri Lankan construction industry are expected to be positive, assuming an improvement in economic stability and a resumption of investment in transport, housing, and renewable energy projects, and government policies to promote manufacturing and exports.

The Sri Lankan construction industry is expected to register an average annual growth of 5.6% from 2024 to 2027, picking up from the low base in 2022 and 2023.

In January 2023, India’s state-owned railway company Indian Railway Construction International (IRCON) launched a Rs 28.9 billion ($90 million) program for the up gradation of the railway track in Jaffna.

February 01, Colombo (LNW): The Sri Lankan Rupee indicates appreciation against the US Dollar today (01) in comparison to yesterday, as per the official exchange rates issued by the Central Bank of Sri Lanka.

Accordingly, the buying price of the US Dollar has dropped to Rs. 310.54 from Rs. 312.09, and the selling price to Rs. 320.40 from Rs. 321.85.

The Sri Lankan Rupee indicates similar pattern against several other foreign currencies as well.

By: Staff Writer

February 01, Colombo (LNW): Litro Gas Lanka Ltd. has recently declared an impressive contribution of Rs. 3 billion in dividends to the Treasury through its primary shareholder, Sri Lanka Insurance Corporation. This consists of Rs. 1.5 billion made in October 2023 and another Rs. 1.5 billion paid on 26 January 2024.

Litro said this noteworthy gesture comes at a crucial time when Sri Lanka is actively seeking to boost state revenue to attain stability in the aftermath of a pandemic followed by an economic downturn.

Furthermore, Litro has demonstrated its commitment to national empowerment by also paying Rs. 2.6 billion in taxes and duties, solidifying its position as one of the few profitable state-owned enterprises.

Despite facing challenges, including a shortage of foreign reserves that affected its supply chain, Litro swiftly resolved the issues.

Litro Chairman Muditha Peiris said that the fiscal year 2023 has proven to be profitable for Litro, despite economic challenges and hardships.

“We are dedicated to ensuring that LPG remains affordable for our existing customer base while expanding our reach to the rural sector in the upcoming financial year,.” He added.

He highlighted the company’s focus on various aspects of safety, including educational initiatives to promote the importance of switching to LPG as a safer and healthier alternative.

Litro’s resilience and growth can be attributed to the strategic efforts of the management under the guidance of the Chairman who took over the company during a turbulent period.

The turnaround entailed ensuring a steady and uninterrupted supply of LPG to industries and households in turn ensuring convenience as well as safeguarding livelihoods across many key industrial segments.

As the largest stakeholder in the local LPG market, Litro managed to procure from the most technically qualified, competitive, and cost-effective suppliers to eliminate shortages promptly.

The selection of a supplier has been a key priority, focusing on their consistent capability to meet supply requirements and their commitment to offering a competitive price, thereby ensuring both reliability and cost-effectiveness.

Litro adopted a pricing mechanism aligning with global market rates to ensure that benefits from price fluctuations are reflected in the prices of its products. These pioneering efforts have empowered the industry as well as local enterprises and households dependent on LPG.

Especially in the past years, Litro has emerged as a success story for how State-Owned Enterprises can be steered to profitability while prioritising welfare.

The company serves as a blueprint for growth and recovery for SEOs dispelling the misconception that privatisation is the only solution. As Litro contributes significantly to the national treasury, it plays a crucial role in supporting the country’s economic recovery and stability.

February 01, Colombo (LNW): The Sri Lankan Rupee has largely appreciated against the US Dollar today (01) in comparison to yesterday, as per the exchange rates issued by leading commercial banks in the country.

At Peoples Bank, the buying price of the US Dollar has dropped to Rs. 309.16 from Rs. 310.88, and the selling price to Rs. 319.94 from Rs. 321.71.

At Commercial Bank, the buying price of the US Dollar has dropped to Rs. 308.60 from Rs. 309.60, and the selling price to Rs. 319.50 from Rs. 320.50.

At Sampath Bank, the buying price of the US Dollar has dropped to Rs. 309.5 from Rs. 312, and the selling price to Rs. 318.50 from Rs. 321.