Finance

Sri Lanka insurance premiums to rise after frequent floods; NITF hit: Fitch

Wednesday September 13, 2017 5:58 pm

ECONOMYNEXT – Sri Lanka’s re-insurance premiums on flood cover is likely to rise after a spate of unusual rainfall and insurers has to re-look at prices, Fitch, a rating agency said, while a state insurer had lost money on a blanket public cover.

Floods in May 2016 and May 2017 had resulted in 21 billion rupees of claims being paid, most of which was re-insured abroad.

"Changing weather patterns have increased the frequency and severity of errant rainfall, raising long-term risks for insurers and highlighting the need for more rigorous pricing and assessment of such risks in Sri Lanka’s highly competitive non-life sector," Fitch Rating said in a statement.

The credit profiles of Sri Lanka Insurance Corporation Limited (AA+(lka)/Stable), HNB General Insurance Limited (A(lka)/Stable) and Continental Insurance Lanka Limited (A(lka)/Stable) – are likely to remain intact despite these challenges, the rating agency said.

Sri Lanka’s National Insurance Trust Fund, a state entity to which 30 percent of re-insurance has to be ceded has estimated claims from May 2017 floods to be around 4.0 billion rupees, down from 17 billion rupees a year earlier.

Fitch said the net cost on non-life insurers due to the May 2016 floods to have been around 500 to 600 million rupees after re-insurance.

Since April 2016 the NITF has provided a natural disaster cover of 10 billion rupees for the government to compensate households, small business and relief work from April 2016. Claims were 3.8 billion rupees.

From 2017-2018 it was increased to 15 billion rupees. But a delay in government procurement process has prevented the re-insurance being purchased in time for May 2917 floods.

The cover had generated a 600 million rupee loss for NITF.

NITF had enough capital to absorb 2.2 billion rupees of flood related losses in 2016 and 3.1 billion for 2017 with a risk based capital ratio of 558 percent.

But capital could be hurt through dividend payments, Fitch warned. In in 2016 the NITF had paid 3.2 billion rupees to the state and in 3.0 billion in 2015.

Fitch: Reinsurance Keeps Sri Lankan Insurers Afloat Amid Floods

Fitch Ratings-Colombo/Hong Kong-10 September 2017: Most Sri Lankan non-life insurers should be able to absorb near-term volatility and the effects of adverse weather-related events given extensive use of reinsurance, says Fitch Ratings.

However, frequent occurrence of major catastrophic floods could affect insurers’ capital, especially that of state-owned local reinsurer, National Insurance Trust Fund Board (NITF, AA-(lka)/Stable).

Changing weather patterns have increased the frequency and severity of errant rainfall, raising long-term risks for insurers and highlighting the need for more rigorous pricing and assessment of such risks in Sri Lanka’s highly competitive non-life sector.

Reinsurance premiums paid by primary insurers are also likely to increase. The credit profiles of Sri Lanka’s non-life insurers – Sri Lanka Insurance Corporation Limited (AA+(lka)/Stable), HNB General Insurance Limited (A(lka)/Stable) and Continental Insurance Lanka Limited (A(lka)/Stable) – are likely to remain intact despite these challenges.

Sri Lanka experienced back-to-back floods and landslides in May 2016 and May 2017.

NITF estimates claims of around LKR4 billion from the May 2017 floods, which mainly affected suburban and rural areas, significantly lower than claims of around LKR17 billion from the May 2016 floods, which predominantly affected industrial areas, with a handful of large commercial claims accounting for a large share of the total.

However, despite these large claims, we estimate the net impact on non-life insurers due to the May 2016 floods to have been around LKR0.5 billion-0.6 billion, mainly from retention and reinstatement costs.

These costs were likely to have added around 70bp to non-life insurers’ loss ratios in 2016. The floods, which left hundreds dead, damaged homes and disrupted businesses, were the country’s worst natural catastrophe since the 2004 south-Asian tsunami.

Local regulations require 30% of all non-life reinsurance be ceded to NITF, with the balance ceded to the international reinsurance market. NITF’s reinsurance portfolio is protected via retrocession cover, which has helped contain losses from the record-high flood-related primary insurer claims.

NITF has provided the Sri Lankan government with natural disaster cover since April 2016 – the National Natural Disaster Insurance Scheme (NNDIS) – which covers all households, small businesses and relief work stemming from natural disasters.

Cover was increased to LKR15 billion for 2017-2018, from LKR10 billion, with total claims of around LKR3.8 billion in 2016 and LKR1.6 billion in 2017.

NITF recovered LKR2.6 billion in 2016 via NNDIS’s reinsurance cover that was in place for 2016-2017; that is, after a deductible of LKR0.5 billion, which was retained by the company, as well as NITF’s share of claims on NNDIS’s reinsurance cover.

However, a delay in government approval meant NITF’s reinsurance cover for NNDIS for 2017-2018 only came into effect after the May 2017 floods, resulting in a LKR600 million loss, as the deductible (company retention) was raised to LKR1 billion.

NITF, as a state-owned entity, must go through a state procurement committee to obtain reinsurance, which can be time consuming.

NITF has satisfactory capital buffers to absorb flood-related net losses of LKR2.2 billion for 2016 and LKR3.1 billion for 2017, with a high regulatory risk-based capital ratio of 558% at end-March 2017. However, capitalisation could come under pressure if NITF continues paying high dividends to the government. NITF paid LKR3.2 billion in 2016 and LKR3 billion in 2015, which accounted for 103% and 70% of profit, respectively.

Sri Lanka’s non-life insurers have low retention in the non-motor segment, with over 80% of the fire class, which typically covers flood-related policies, being reinsured.

Fire class accounted for around 2% of total non-life net written premiums (NWP) in 2016. Insurers also provide flood protection for the motor class (75% of NWP in 2016), but motor-related claims were smaller than under the fire class.

Natural catastrophe losses, such as floods, are covered under reinsurance treaties and excess-of-loss reinsurance covers.

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)