Sri Lanka motor insurance growth seen slowing next year
ECONOMYNEXT – Rapid growth in Sri Lanka’s motor insurance sector is expected to slow down next year with tax hikes announced by the government dampening vehicle imports, Fitch Ratings agency said.
Non-life GWP (gross written premium) grew 11.7 percent in the first half of 2015, up sharply from 3.7 percent in the same period last year, it said in a new report on the island’s insurance sector.
The motor insurance business grew 16 percent in this period compared with a growth of 5.4 percent in the same 2014 period, driven by the government’s favourable tax policy towards small cars.
Small-car taxes were reduced in February 2015 to 155 percent of cost, insurance and freight value (CIF), from 173 percent while a wage increase for civil servants and lower fuel prices also spurred demand for cars.
“Fitch expects a slowdown in the growth rate for motor insurance in 2016 as new vehicle registrations are likely to fall after the government proposed to increase taxes on vehicles in its budget,” the report said.
CIF for small cars have now increased back to around 173 percent.
Fitch Ratings noted how in 2012, motor premium growth almost halved to 16.6 percent, from 29.6 percent in 2011, after small-car registrations more than halved when the government increased taxes on small cars to 200 percent, from 120 percent of CIF. (Colombo/December 15, 2015)