Finance

Sri Lanka insurance premiums to fall amid import controls as new business sought: Fitch

Tuesday September 15, 2020 10:40 am

ECONOMYNEXT – Sri Lanka’s general insurance premiums may fall as motor business stalls amid import controls and insurers seek new areas to grow in weak economic conditions, Fitch Ratings said.

Economic difficulties are also forcing customer to drop comprehensive coverage.

“Fitch believes that new business premiums from motor insurance – which accounted for around 60 percent of the non-life insurance industry’s gross premiums – will contract in 2020 with the reduction in new vehicle registrations,” the rating agency said.

“We believe the release of the limited new-vehicle stocks into the market will be insufficient to offset the contraction in new business premiums.

“In addition, some policyholders are switching to third-party insurance from comprehensive coverage and allowing policies to lapse due to the economic stress caused by the coronavirus pandemic, which will impede non-life insurers’ business growth.

Total non-life premiums had fallen by 8 percent and motor insurance was down 4 percent in the first half of 2020 from a year earlier from a year earlier, based on regulator data.

Growth in the industry’s motor premiums slowed to 2 percent in 2019 from 16 percent amid import controls imposed after liquidity injections pressured the currency.

In 2020 many imports including vehicles were halted after money printing in March and April drover the rupee close to 200 to the US dollar.

There have been calls to reform the central bank to curb its domestic operations and end monetary instability and currency collapse.

Private credit has since turned negative, compressing consumption and imports despite high levels of excess liquidity.

Non-life insurers will speed up their expansion into non-motor business lines to counter the impact from lower motor insurance sales, Fitch said.

“Some insurers already target to increase business exposure to non-motor lines, such as the fire, property, health and micro insurance classes,” Fitch said.

“However, we believe that the expansion will only partly offset the premium loss from motor insurance.”

The shock from import controls comes as underwriting profitability was already down for non-motor insurance.

“The three-year average claims ratio for non-motor lines was 77 percent, higher than the 61 percent for motor insurance business, which is generally aided by benefits from economies of scale,” Fitch said.

Fitch said regulatory capital of insurers could also come under pressure if profits fall, but average risk based capital ratio was 238 percent for the sector above the 120 percent required.

The regulator had also halted dividend payouts.

The full statement is reproduced below:

Competition in Sri Lanka Non-Life Sector to Rise as Premiums Fall

Mon 14 Sep, 2020 – 21:00 ET

Fitch Ratings-Kansas City-14 September 2020: Price competition among non-life insurers in Sri Lanka is likely to intensify as a ban on auto imports and an economic downturn hinder premium growth, Fitch Ratings says.

Fitch believes that new business premiums from motor insurance – which accounted for around 60% of the non-life insurance industry’s gross premiums – will contract in 2020 with the reduction in new vehicle registrations.

We believe the release of the limited new-vehicle stocks into the market will be insufficient to offset the contraction in new business premiums.

In addition, some policyholders are switching to third-party insurance from comprehensive coverage and allowing policies to lapse due to the economic stress caused by the coronavirus pandemic, which will impede non-life insurers’ business growth.

Total non-life premiums and premiums from motor insurance fell by 8% and 4% yoy, respectively in 1H20, data from the Insurance Regulatory Commission of Sri Lanka (IRCSL) showed.

Growth in the industry’s motor premiums slowed to 2% in 2019 from 16% in 2016 due to the government’s efforts to limit the outflow of foreign exchange by curtailing vehicle imports.

The recent ban on auto imports came in the wake of the pandemic as the government tried to control currency depreciation by supporting foreign-currency reserves.

Policymakers have recently indicated that this ban may continue at least over the near term given the economic stress caused by the pandemic.

The sluggish market growth will exacerbate competition among insurers. Underwriting profitability in Sri Lanka’s non-life industry has been dragged down by high price competition and the industry’s combined ratio has been above 100% in recent years.

We also expect the industry claims ratio for non-motor lines to remain high until insurers achieve meaningful growth in the non-motor premium base. The three-year average claims ratio for non-motor lines was 77%, higher than the 61% for motor insurance business, which is generally aided by benefits from economies of scale.

Fitch expects the constrained top-line growth, potential amplification of price competition as well as lower investment returns to put pressure on non-life insurers’ earnings, which will be softened by the temporary reduction in claims during the lockdown period, particularly from motor insurance.

Insurers’ regulatory capital positions could also come under pressure from potential stress in earnings, although the impact may be partly offset by a possible reduction in liability-risk capital charges from lower motor claims and IRCSL’s direction to insurers to suspend dividend distributions until further notice.

The non-life industry had satisfactory capital buffers, with an average risk-based capital ratio of 238% at end-June 2020, above the 120% regulatory minimum.

Fitch expects the non-life insurers to expedite their expansion into non-motor business lines to counter the impact from lower motor insurance sales. Some insurers already target to increase business exposure to non-motor lines, such as the fire, property, health and micro insurance classes. However, we believe that the expansion will only partly offset the premium loss from motor insurance.

Insurers’ expansion into non-motor lines will likely be gradual given the weaker economic environment, which could keep the near-term demand for less-essential insurance products in check.

Non-motor insurance lines’ contribution to industry non-life gross premiums rose marginally to 41% in 2019 from 38% in 2016.

Constitutional Amendments

Sri Lanka budget ignores provincial polls while stripping council powers: MP

Friday November 13, 2026 6:35 pm

ECONOMYNEXT – Sri Lankan opposition legislator has criticized the government’s 2027 budget speech for failing to mention or allocate provisions for long-delayed Provincial Council elections, while accusing the administration of stripping away devolved powers.

“Previous governments had a policy on their policy statement: they would mention the Provincial Council elections,” Illankai Tamil Arasu Kachchi (ITAK) MP Shanakiyan Rasamanickam told parliament during the budget debate.

“Not a single word about the Provincial Council election! About the Provincial elections, you haven’t mentioned a word, but what have you mentioned? You are taking away the powers of the Provincial Council.”

Rasamanickam pointed out that the government was taking over six provincial hospitals — Mullaitivu, Mannar, Kilinochchi, Vavuniya, Avissawella, and Gampaha — while continuing to delay the polls.

“You are taking away power that was given to the Provincial Council, whilst not having Provincial Council elections,” he said.

“Last year, powers given to the provinces regarding environmental policies — you’ve taken it back, with no consent of the Provincial Council.”

He also criticized the budget speech for making no mention of land release issues in the North and East, a new constitution, or the government’s pledge to abolish the executive presidency.

“In this budget, I must also mention, not only the Provincial Council election, about the new constitution — not a single word about the constitution! What is happening to your plans and proposals of abolishing the executive presidency? Where is the new constitution?” Rasamanickam questioned.

The legislator further raised concerns over proposed legislation, including the Protection of the State from Terrorism Act (PSTA) and the Organized Crime Bill, arguing they were more repressive than the existing Prevention of Terrorism Act (PTA) they are meant to replace.

“The trajectory of this government is worrying to me. It’s really worrying to me,” Rasamanickam said.
“Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)