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Monday December 5th, 2022

Sri Lanka’s AIA Insurance strongly capitalized amid Covid-19

ECONOMYNEXT – Sri Lanka’s AIA Insurance is strongly capitalized above the industry, official data shows, with officials saying its prudent investment approach and practices provide policyholders with stability through economic cycles and shocks like Covid-19.

In 2015, industry watchdog Insurance Regulatory Commission of Sri Lanka (IRCSL) brought in a risk-based capital regime replacing an earlier rule-based one.

The principle behind the capital adequacy rule is to ensure insurers are solvent enough to honour claims as they fall due.

Domestic insurers started to fully comply with the risk-based capital (RBC) regime in 2016 and must maintain a minimum RBC ratio of 120 percent.

Life insurers that report an RBC below 160 percent must provide a written submission to the regulator with a plan to improve capitalization.

AIA Sri Lanka reported the industry’s highest capital adequacy ratio at 655 percent according to the last published regulator data for 2018, improving from 595 percent a year earlier.

State-run Sri Lanka Insurance Corporation reported the second-highest capital adequacy ratio of 440 percent up from 432 percent in 2017.

“AIA Sri Lanka’s high capital adequacy ratio should provide comfort to stakeholders that the company is able to stand strong in the face of external shocks.  The capital adequacy ratio of over 5 times the stipulated regulatory minimum is a reflection of the capital that shareholders are maintaining within the business and of the prudent investment strategy that has been in place for many years” explains Gavin D’ Rosairo, Chief Financial Officer at AIA Sri Lanka.

“We have an investment policy that ensures significant exposures in government securities and high investment-grade debentures.  Credit quality is of utmost importance and therefore we ensure that we invest in A and above instruments as rated by Fitch Ratings.  We don’t invest in shares from our universal life fund for this same reason.”

Life insurers, especially those more exposed to the middle-to-low income segments, should see a spike in surrenders given the loss of income due to the covid-19 impact, though medical insurance claims would be lower during the lockdown, Asia Securities Research said in a June 2020 note.

“We also expect a significant slowdown in group insurance, downsizing in policy ticket size, as an increased number of corporates face business continuity concerns,” the report said.

“A recent industrywide push into group life policies saw an uptick in health insurance claims, across the board.

“But, with the COVID-19 scare reducing hospitals visits and admissions, life insurers will see a decline in claims in (the first half of 2020).”

AIA says it used digital channels for policyholders to make claims as well as premiums.

“This helped us to pivot quickly during the lockdowns and ensure continued service to our policyholders,” D’ Rosairo said.

According to Asia Securities, life insurance investment incomes will cushion the negative impact on operational cashflows. “As such, we still expect companies to return a profit, albeit affected, given the cash-rich nature of the business,” Asia Securities said.

For D’ Rosairo, the covid-19 crisis presents an opportunity for growth.

“It takes a crisis for people to realise the importance of having health and life insurance. Several insurance companies have digital channels but what will matter now is how effectively technology will be used to generate more awareness, increase accessibility, and generate growth,” D’ Rosairo said.

(COLOMBO, 27 July 2020)

 

 

 

 

 

 

 

 

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Paris Club proposes 10-year moratorium on Sri Lanka debt, 15 years of debt restructuring

ECONOMYNEXT — The Paris Club group of creditor nations has proposed a 10-year debt moratorium on Sri Lankan debt and 15 years of debt restructuring as a formula to resolve the island nation’s prevailing currency crisis, India’s The Hindustan Times reported.

While the Paris Club has yet to formally reach out to India and China, Colombo has yet to initiate a formal dialogue with the Xi Jinping regime, the newspaper reported on Saturday December 03, inferring that the chances of the International Monetary Fund (IMF) approving its 2.9 billion dollar extended fund facility for Sri Lanka in December now ranges from very low to nonexistent.

“This means that Sri Lanka will have to wait for the March IMF meeting of the IMF before any aid is extended by the Bretton Woods institution,” the newspaper reported.

“Fact is that for Sri Lanka to revive, creditors will have to take a huge hair cut with Paris Club clearly hinting that global south should also take the same cut as global north notwithstanding the inequitable distribution of wealth. In the meantime, as Colombo is still to get its act together and initiate a dialogue and debt reconciliation with China, it will need bridge funding to sustain the next three month before the IMF executive board meeting in March 2023. Clearly, things will get much worse for Sri Lanka before they get any better—both economically and politically,” the report said. (Colombo/Dec04/2022)

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Sri Lanka’s Ceylon tea prices up amid low volumes

ECONOMYNEXT – Sri Lanka tea prices picked up at the last auction in November amid low volumes, brokers said.

“Auction offerings continued to record a further decline and totalled 4.2 million Kilograms, of which Ex-Estate offerings comprised of 0.6 million Kilograms. There was good demand,” Forbes and Walker Tea brokers said.

“In the Ex-Estate catalogues, overall quality of teas showed no appreciable change. Here again, there was good demand in the backdrop of extremely low volumes.”

High Growns

BOP Best Westerns were firm to 50 rupees per kg dearer. Below best and plainer types were Rs.50/- per kg easier on last.

Nuwara Eliya’s were firm.

BOPF Best Westerns were firm to selectively dearer. Below best and plainer teas declined by 50 rupees per kg.

Uva/Uda Pussellawas’ were generally firm and price variances were often reflective of quality with the exception of Select Best Uva BOPF’s which were firm and up to 50 rupees per kilogram dearer.

CTC teas, in general, were mostly firm.

“Most regular buyers were active, with perhaps a slightly more forceful trend from the local trade,” brokers said.

Corresponding OP1’s met with improved demand. Well-made OP/OPA’s in general were fully firm, whilst the Below Best varieties and poorer sorts met with improved demand. PEK/PEK1’s, in general, were fully firm to selectively dearer.

In the Tippy catalogues, well-made FBOP/FF1’s sold around last levels, whilst the cleaner Below Best and cleaner teas at the bottom appreciated. Balance too were dearer to a lesser extent.

In the Premium catalogues, very Tippy teas continued to attract good demand. Best were firm to selectively dearer, whilst the Below Best and cleaner teas at the bottom appreciated

Low Growns

Low Growns comprised 1.8 million Kilograms. Market met with improved demand, in general.

In the Leafy & Semi Leafy catalogues, select Best BOP1/OP1’s were fully firm, whilst the Below Best/bolder BOP1’s were barely steady.

Low-grown teas, farmed mainly by smallholders and exported to the Middle East and Central Asia, are the most sought-after and expensive Ceylon Teas.

Low-grown CTC prices have gained this week to 982.80 per kilogram this week from 934.76 per kilogram last week.

Few Select best BOP1s maintained, whilst best and below best were irregularly lower. Poorer types maintained.

BOPF’s in general, firm market.

FBOPF/FBOPF1’s select best and best increased in value, whilst the below best and bottom held firm.

Selected best BOP1’s maintained, whilst best and below best were irregularly lower.Poorer types maintained.

OP1’s selects best together with best and below best were firm to dearer. Poorer sorts were fully firm.

Medium Growns

BOPF’s, select best gained by 50 rupees per kilogram. Others maintained.

BOP1’s select best dearer by 100 rupees per kg whilst all others moved up by 50 rupees per kg.

OP1: select best gained by 100 rupees per kg whilst all others dearer by 100 rupees per kg.

OP/OPA’s in general, dearer by 50 rupees per kg whilst the poorer sorts were firm.

PEK’s Select best gained by 50 rupees per kg whilst all others maintained. PEK1: In general, dearer by 50 rupees per kg. (Colombo/Dec 04/2022)

 

 

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Sri Lanka Ports Authority East Terminal contractor paid: Minister

ECONOMYNEXT – Sri Lanka’s Ports Authority had paid a deposit for a gantry crane and made the required payment for the contractor to complete building the East Container Terminal, Minister Nimal Siripala De Silva said.

The East Container Terminal, a part of which is already built is being completed as a fully SLPA owned terminal at a cost of 480 million dollars Ports and Shipping Minister de Silva said.

“ECT we are funding with money available in the ports authority,” he said.

“Up to now we have paid an advance for the gantry crane. And for the construction we have paid all the money agreed with the contractor. So that is going on well.”

Sri Lanka is undergoing the worst currency crisis in the history of the island’s soft-pegged (flexible exchange rate) central bank which has created difficulties in funding the project.

“Every penny we collect as dollars we are keeping them separately and utilizing that for the Eastern Terminal work,” Minister de Silva said.

“We are confident that the ECT will be completed within the envisaged time. It is a difficult task in view of the dollar problem.

Banks were also not releasing the dollar deposits of the SLPA earlier but are now doing so, he said.

“Our deposits in banks they have utilized for urgent other national purposes,” he said.

“So they are releasing that money slowly. I am happy that they are releasing that money little by little. So with that we will be able to manage that.”

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